GENOVA,Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥4.97B
• Operating Income: ¥-36M
• Net Income: ¥-14M
• EPS: ¥-0.80

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

Verdict: FY2026 Q2 was a mixed quarter—top-line contracted modestly and the company remained loss-making, but losses narrowed and liquidity stayed robust. Revenue was 49.74 (100M JPY), down 3.3% YoY, with gross profit of 29.65 and a high gross margin of 59.6%, indicating a solid value-add model. Operating income improved YoY by 25.6% but was still a loss of -0.36, translating to an operating margin of approximately -0.7%. Ordinary income was -0.26 and net income -0.13, with a net margin of about -0.3%. SG&A at 30.01 slightly exceeded gross profit (29.65), keeping the company just below the breakeven line on an operating basis. EBITDA was effectively breakeven at 0.02, consistent with the narrowing loss narrative. Cash and deposits were strong at 53.56 against current liabilities of 19.91, delivering a current ratio of 366% and ample near-term liquidity. Operating cash flow was -0.89, more negative than the accounting loss, implying continued cash burn; financing cash inflow of 2.59 supported the cash position. Leverage was conservative with D/E at 0.53x and long-term loans at 6.77; however, interest coverage was negative due to the operating loss, signaling sensitivity if rates rise or earnings slip. ROE was a small negative at -0.2%, driven by a slightly negative net margin, modest asset turnover (0.499), and moderate leverage (1.53x). ROIC at -1.2% indicates returns still below the cost of capital, requiring operational improvements or portfolio optimization. Goodwill and intangible assets totaling ~21.6 (100M JPY) introduce medium-term impairment risk if profitability does not recover. Margin expansion or compression in basis points versus prior periods cannot be quantified due to limited historical margin disclosure, but directionally operating profitability improved YoY. Forward-looking, the proximity to EBITDA breakeven and ample cash provide runway, but management must align SG&A with revenue trajectory and convert near-breakeven EBITDA into positive OCF to sustain growth without relying on financing inflows.

Profitability Analysis

ROE decomposition (DuPont): ROE (-0.2%) = Net Profit Margin (-0.3%) × Asset Turnover (0.499) × Financial Leverage (1.53x). The largest drag is the negative net margin, while asset turnover is moderate and leverage is restrained. The net margin remains negative because SG&A (30.01) marginally exceeds gross profit (29.65), keeping operating income in the red despite non-operating income of 0.12. EBITDA of 0.02 suggests incremental improvement at the operating level, but depreciation (0.38) pushes EBIT negative. The improvement in operating income (+25.6% YoY) implies better cost control or pricing/mix, but revenue declined 3.3% YoY, limiting operating leverage. Sustainability: the path to profitability appears achievable if SG&A discipline continues and revenue stabilizes or grows; however, given revenue contraction and the high fixed-cost profile, improvements may be fragile without demand recovery. Concerning trend: SG&A outpaced gross profit this quarter (30.01 > 29.65), indicating insufficient scale and pressuring margins.

Growth Assessment

Revenue declined 3.3% YoY to 49.74, pointing to a soft demand backdrop or slower customer acquisition. Gross margin is strong at 59.6%, implying healthy unit economics or a high-value service mix. Operating loss narrowed by 25.6% YoY, aided by near-breakeven EBITDA (0.02), but sustained top-line pressure limits operating leverage benefits. With limited disclosure on segment mix and customer metrics, it is unclear whether declines are cyclical, seasonal, or competitive. Outlook hinges on restoring revenue growth while maintaining SG&A discipline; given the high gross margin, even modest top-line growth could drop through meaningfully if fixed costs are contained. Near-term, focus should be on sales execution, pricing, and churn management to defend revenue, while continuing cost rationalization to achieve a clear operating profit. Without visibility on backlog or bookings, the sustainability of improvements remains uncertain.

Financial Health

Liquidity is strong: current ratio 366.1% and quick ratio 366.1%, supported by cash and deposits of 53.56 and accounts receivable of 14.98 against current liabilities of 19.91. No warning on current ratio (<1.0) or D/E (>2.0): D/E stands at 0.53x, indicating conservative leverage. Maturity mismatch risk appears low given ample cash relative to current liabilities. Long-term loans total 6.77; short-term loans and total interest-bearing debt are unreported, but net cash vs current liabilities provides cushion. Interest coverage is negative due to operating losses, a key constraint if losses persist or financing costs rise. Off-balance sheet obligations are not disclosed; none can be assessed from available data.

Cash Flow Quality

OCF/Net Income is shown as 6.82x but is not meaningful because both OCF (-0.89) and NI (-0.13) are negative; the more relevant point is that cash burn exceeds the accounting loss. Free cash flow is not disclosed; using capex (-0.28) as a proxy for investing outflows implies approximate FCF of about -1.17 (OCF + capex), indicating reliance on financing (financing CF +2.59) to support cash. Working capital: with high cash and receivables, there is no evidence of aggressive working capital pull-forward; however, the negative OCF suggests either weaker collections or upfront expense recognition—detail is unavailable to isolate drivers. Earnings quality is constrained by the gap between EBITDA near zero and negative OCF, indicating non-cash add-backs or working capital outflows are at play; sustained positive OCF is needed to validate underlying profitability.

Dividend Sustainability

Dividend data is unreported. Given negative net income and estimated negative FCF (~-1.17), any dividend would lack coverage from internal cash generation and would rely on the cash balance or financing inflows. The calculated payout ratio (-4113.8%) is not economically meaningful due to negative earnings. Policy outlook: absent disclosed guidance, prudence would suggest prioritizing reinvestment and balance sheet strength until consistent positive OCF and ROIC above the cost of capital are achieved.

Risk Assessment

Business Risks:

• Revenue contraction (-3.3% YoY) limits operating leverage and path to profitability.
• SG&A exceeding gross profit keeps operating margin negative.
• High goodwill and intangible balances (~21.6) raise impairment risk if earnings do not recover.
• Potential customer acquisition or retention challenges (implied by revenue decline; details unreported).
• Limited disclosure of segment performance and KPIs reduces visibility into drivers.

Financial Risks:

• Negative interest coverage (-21.48x) reflects vulnerability if rates rise or earnings slip.
• Negative OCF (-0.89) and estimated negative FCF (~-1.17) necessitate ongoing financing or cash drawdown.
• ROIC at -1.2% is below cost of capital, pressuring valuation and capital allocation effectiveness.
• Reliance on financing CF (+2.59) to support cash amid operating cash burn.

Key Concerns:

• Sustained breakeven EBITDA must translate into positive EBIT and OCF to avoid prolonged cash burn.
• Visibility into investing cash flows and capital commitments is limited (investing CF unreported).
• EPS figures show basic EPS negative and diluted EPS positive, suggesting potential calculation quirks or data timing effects; requires clarification.

Investment Implications

Key Takeaways:

• Near-breakeven EBITDA with narrowed operating loss indicates operational progress despite softer revenue.
• Liquidity is ample (cash 53.56; current ratio 366%), providing runway for execution.
• Cash generation remains the bottleneck; OCF is more negative than NI, and FCF likely negative.
• Leverage is conservative (D/E 0.53x), but earnings coverage of interest is inadequate.
• ROIC (-1.2%) below threshold underscores need for improved capital efficiency or portfolio optimization.

Metrics to Watch:

• Quarterly operating margin and EBITDA progression to clear breakeven.
• Operating cash flow and working capital movements (receivables collection).
• Revenue trajectory and booking/backlog indicators once disclosed.
• SG&A growth vs revenue growth (operating leverage inflection).
• Impairment indicators for goodwill/intangibles.
• Interest coverage and financing cash flow dependency.

Relative Positioning: Compared with domestic small-cap digital/healthcare IT peers, GENOVA shows stronger liquidity and conservative leverage but lags on profitability and cash conversion; closing the SG&A-to-gross profit gap and restoring top-line growth are prerequisites for ROIC normalization.

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