GENOVA,Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥4.97B
• Operating Income: ¥-36M
• Net Income: ¥815M
• 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

GENOVA (93410) reported FY2026 Q2 consolidated results under JGAAP showing a modest top-line contraction but a meaningful improvement in losses and healthy operating cash generation. Revenue was ¥4.974bn, down 3.3% YoY, with gross profit of ¥3.854bn and a very high gross margin of 77.5%, indicating strong unit economics and pricing power in its service mix. Despite the rich gross margin, SG&A intensity kept operating income slightly negative at -¥36m, albeit improving 25.6% YoY. Ordinary loss narrowed to -¥26m and net loss to -¥13m (EPS -¥0.80), reflecting better non-operating balance and lower overall losses. Depreciation and amortization were modest at ¥33.9m, implying low capital intensity and a largely asset-light model. The DuPont profile shows a slim negative net margin (-0.26%), asset turnover of 0.499x, and financial leverage of 1.53x, resulting in a reported/calculated ROE of -0.20%. Liquidity appears strong: current assets of ¥7.728bn against current liabilities of ¥1.489bn yield a current ratio of 519% and working capital of ¥6.239bn. Operating cash flow was robust at ¥588.8m, far exceeding accounting losses (OCF/NI of -45.3x), pointing to favorable working capital movements and/or non-cash charges supporting cash generation. Financing cash flow was a net outflow of -¥335.7m, suggesting debt repayment or other financing uses; dividends were not paid (DPS ¥0.00). Several items are undisclosed in XBRL (e.g., cash and equivalents, inventories, investing cash flow, equity ratio, shares outstanding), which limits precision in some ratio analyses and capital allocation conclusions. Reported income tax expense appears elevated (¥388.5m) relative to losses, likely reflecting timing differences, tax-effect accounting, or adjustments; the provided effective tax rate metric is 0.0% and not decision-useful this quarter. Interest expense was negligible at ¥0.4m, and leverage-related stress appears low given the large net asset base and minimal financing costs. EBITDA was essentially breakeven (-¥2.1m), implying that a modest improvement in operating efficiency or revenue recovery could push operating profitability positive. Overall, the quarter highlights resilient gross profitability and strong liquidity, with the path to sustained profitability hinging on SG&A efficiency and revenue trajectory. Data gaps (especially cash and investing flows) warrant caution when interpreting free cash flow and balance sheet granularity.

Profitability Analysis

ROE_decomposition: Net profit margin -0.26% × asset turnover 0.499 × financial leverage 1.53 = ROE -0.20% (reported matches calculated). The negative margin is the principal ROE drag; leverage is modest and not a major driver. margin_quality: Gross margin is very high at 77.5% (gross profit ¥3.854bn on revenue ¥4.974bn), signaling strong pricing and/or a high-value service mix. Operating margin is -0.7% (operating loss ¥36m), indicating SG&A absorption remains heavy relative to current scale. Ordinary margin improved versus operating margin, implying some non-operating gains or lower non-operating costs. Net margin at -0.26% improved YoY as losses narrowed. operating_leverage: EBITDA of -¥2.1m on revenue of ¥4.974bn suggests the business is close to EBITDA breakeven; small revenue growth or SG&A normalization could drive positive operating leverage. D&A of ¥33.9m is low, indicating limited fixed-cost depreciation burden; the main fixed cost anchor is likely personnel and selling expenses. Interest burden is negligible (¥0.4m), so incremental operating profit largely flows to pre-tax income.

Growth Assessment

revenue_sustainability: Revenue declined 3.3% YoY to ¥4.974bn; given the high gross margin, minor volume or pricing recovery can materially aid earnings. No segment breakdown is available to assess mix shifts or churn/new bookings. profit_quality: Despite a net loss (-¥13m), OCF was ¥588.8m, indicating strong cash conversion this quarter driven by working capital and non-cash items. EBITDA near breakeven suggests underlying operations are stabilizing. outlook: Near-term earnings inflectors are SG&A efficiency and stabilization/recovery of top line. With high gross margin and low D&A, even low single-digit revenue growth or cost discipline could turn operating income positive. Data gaps (e.g., order backlog, pipeline) limit forward visibility; continued OCF strength would support investment capacity once disclosed capex is known.

Financial Health

liquidity: Current assets ¥7.728bn vs. current liabilities ¥1.489bn → current ratio 519% and working capital ¥6.239bn, indicating strong short-term solvency. Quick ratio equals current ratio (no inventory disclosed), reinforcing liquidity strength; cash and equivalents not disclosed. solvency: Total liabilities ¥1.528bn vs. total assets ¥9.968bn suggest low balance sheet leverage. Debt-to-equity ratio is reported at 0.23x; interest expense of ¥0.4m indicates minimal interest-bearing debt or low rates. capital_structure: Total equity reported at ¥6.535bn, implying modest financial leverage (DuPont leverage 1.53x). Financing CF of -¥335.7m suggests deleveraging or other financing uses in the period. Equity ratio is undisclosed; however, liabilities appear limited relative to assets.

Cash Flow Quality

earnings_quality: OCF of ¥588.8m versus net loss of -¥13m (OCF/NI -45.3x) indicates strong cash generation relative to accounting loss, likely due to favorable working capital inflows and non-cash charges (e.g., D&A). This points to conservative recognition or timing effects rather than weak cash economics. FCF_analysis: Investing cash flow is undisclosed; capex not provided. Therefore, true free cash flow cannot be determined despite strong OCF. The reported FCF of 0 should be treated as ‘not disclosed’ rather than zero. working_capital: Large positive working capital (¥6.239bn) underpins OCF flexibility. The quarter’s cash generation likely benefited from receivables collections or deferred revenue, but specific components are not disclosed.

Dividend Sustainability

payout_ratio_assessment: No dividend declared (DPS ¥0.00; payout ratio 0.0%). With a net loss and lack of historical payout context, current earnings do not support distributions. FCF_coverage: Insufficient data to assess FCF coverage of dividends due to undisclosed investing cash flows/capex. On OCF alone, coverage would be ample, but this is not a complete view. policy_outlook: Given loss-making status and focus on improving operating margin, capital allocation likely prioritizes reinvestment and balance sheet resiliency over near-term dividends, absent explicit policy disclosures.

Risk Assessment

Business Risks:

• Top-line softness (-3.3% YoY) pressure on scale benefits and SG&A absorption.
• Dependence on high gross margins; adverse pricing or mix shifts could quickly erode profitability.
• Execution risk in cost control required to achieve sustained operating profitability.
• Limited disclosure on segment mix, customer concentration, and backlog reduces visibility.
• Potential volatility from working capital timing that currently favors OCF.

Financial Risks:

• Data gaps on cash balance and capex obscure liquidity runway and FCF durability.
• Unusual tax expense presentation relative to losses could introduce P&L volatility from tax adjustments.
• Potential refinancing or covenant risks cannot be fully assessed without detailed debt breakdown, though interest expense is minimal.
• Equity ratio not disclosed; net asset reconciliation to total assets not fully transparent from provided items.

Key Concerns:

• Sustainability of positive OCF absent visibility into capex and cash balance.
• Achieving SG&A efficiency to turn operating income positive.
• Reliability of tax line and its impact on bottom-line volatility.

Investment Implications

Key Takeaways:

• High gross margin (77.5%) and near-breakeven EBITDA (-¥2.1m) suggest proximity to operating break-even.
• Revenue dip (-3.3% YoY) constrained operating leverage; small growth could swing to profitability.
• Strong liquidity (current ratio 519%, working capital ¥6.239bn) reduces near-term solvency concerns.
• OCF robust at ¥588.8m despite a small net loss, indicating supportive cash conversion this quarter.
• Leverage appears modest (debt-to-equity 0.23x; interest expense ¥0.4m), limiting financial risk.
• Data limitations (cash, investing CF, equity ratio, share count) restrict full valuation/capital allocation analysis.

Metrics to Watch:

• Revenue growth re-acceleration and order intake/pipeline (if disclosed).
• SG&A ratio to sales and operating margin progression.
• EBITDA and operating income inflection to positive territory.
• Working capital movements (receivables, payables, deferred revenue).
• Capex/investing cash flows to gauge true FCF and reinvestment needs.
• Tax expense normalization and effective tax rate clarity.

Relative Positioning: Within asset-light, service-oriented peers, GENOVA’s gross margin is superior while scale efficiency lags; balance sheet appears conservatively geared, positioning the company to benefit disproportionately from incremental revenue recovery due to high operating leverage.

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