Cocorport (9346) FY2026 Q2 Earnings Report

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Executive Summary

FY2026 Q2 results: Revenue 34.8B yen (YoY +11.4%), Operating Income 4.4B yen (YoY +9.0%), Ordinary Income 4.6B yen (YoY +12.5%), Net Income 3.1B yen (YoY +13.2%). The company achieved broad-based profitability improvement with double-digit revenue growth and operating margin of 12.7%. Free cash flow generation of 3.3B yen and operating cash flow coverage of 1.30x net income confirm cash-backed earnings quality. The balance sheet remains conservative with equity ratio of 74.2% and current ratio of 395.5%, supported by cash reserves of 18.2B yen. However, receivables turnover shows extended Days Sales Outstanding of 120 days, which warrants monitoring for collection risk and working capital efficiency.

Performance Drivers

Revenue increased 3.5B yen or 11.4% YoY to 34.8B yen, driven by top-line expansion in core operations. Gross profit reached 10.2B yen with gross margin of 29.2%, indicating effective cost of sales management. SG&A expenses totaled 5.7B yen, representing 16.5% of revenue, demonstrating controlled operating leverage as absolute SG&A growth remained below revenue growth rate. Operating income improved 0.4B yen or 9.0% YoY to 4.4B yen, with operating margin at 12.7%. The slightly lower operating profit growth rate compared to revenue growth (9.0% vs 11.4%) reflects incremental investments in business operations. Ordinary income of 4.6B yen exceeded operating income by 0.2B yen, primarily due to non-operating income of 0.1B yen consisting of minimal interest income and other financial gains. The non-operating contribution represents approximately 0.3% of revenue, indicating limited reliance on non-core activities. Net income of 3.1B yen grew 13.2% YoY, outpacing operating income growth due to favorable tax burden ratio. The effective tax rate stood at approximately 31.7% (calculated as 1.4B yen tax expense divided by 4.6B yen pretax income). No material extraordinary items such as impairment losses, asset sales, or restructuring charges were disclosed. This represents a revenue up, profit up pattern with sustained operational momentum across all profitability metrics.

Key Metrics

[Profitability] ROE of 10.3% demonstrates solid return generation on shareholder equity, operating margin of 12.7% reflects efficient core business operations, net profit margin of 9.0% indicates effective bottom-line conversion, and gross profit margin of 29.2% confirms pricing power and cost management discipline. [Cash Quality] Cash and deposits of 18.2B yen provide strong liquidity cushion, covering short-term liabilities 2.3x over. Operating cash flow of 4.1B yen represents 1.30x coverage of net income, confirming high-quality cash earnings. Free cash flow generation of 3.3B yen supports both shareholder returns and growth investments. [Investment Efficiency] Total asset turnover of 0.857x indicates moderate asset utilization efficiency. Capital expenditure of 0.5B yen relative to depreciation of 0.4B yen yields CapEx-to-D&A ratio of 1.14x, suggesting ongoing growth investments. [Financial Health] Equity ratio of 74.2% reflects conservative capital structure with low financial risk. Current ratio of 395.5% and debt-to-equity ratio of 0.35x indicate robust financial stability. The balance sheet composition shows current assets of 31.4B yen against current liabilities of 7.9B yen, with retained earnings accumulation reaching 20.4B yen.

Cash Flow Analysis

Operating cash flow of 4.1B yen represents 1.30x coverage of net income at 3.1B yen, confirming cash-backed earnings quality. Cash flow from operations before working capital changes totaled 5.3B yen, with working capital movements including inventory increase of 0.1B yen and receivables decrease contribution of 0.1B yen. Income taxes paid amounted to 1.4B yen while interest paid remained minimal at 0.0B yen. Investing cash flow of negative 0.8B yen was primarily driven by capital expenditures of 0.5B yen for facility and equipment investments. Financing cash flow of negative 2.3B yen reflected shareholder distributions through share repurchases of 0.7B yen and dividend payments. Free cash flow of 3.3B yen (operating CF plus investing CF) provides sufficient capacity to fund both capital returns and future growth initiatives. The operating CF-to-revenue ratio of 11.8% demonstrates effective cash conversion from sales, while the cash conversion cycle shows room for improvement given extended receivables collection period.

Earnings Quality

Ordinary income of 4.6B yen versus operating income of 4.4B yen shows non-operating net contribution of approximately 0.2B yen, representing less than 1% of revenue and indicating minimal earnings dependency on non-core activities. The non-operating segment comprises primarily interest and dividend income with negligible financial expenses. Non-operating income of 0.1B yen includes interest income below 0.1B yen and other miscellaneous financial gains, while non-operating expenses remained near zero with minimal interest expense and commission fees. The close alignment between ordinary income and operating income confirms that earnings are predominantly derived from core business operations rather than financial engineering or one-time gains. Operating cash flow of 4.1B yen exceeds net income of 3.1B yen by 1.0B yen, yielding an operating CF-to-net income ratio of 1.30x, which indicates healthy earnings quality with strong cash realization. The accruals component remains moderate, suggesting limited accounting adjustments and sustainable earnings generation. No material non-recurring items were disclosed in the period.

Guidance Update

Full-year guidance projects revenue of 73.1B yen (YoY +14.6%), operating income of 8.2B yen (YoY +6.3%), ordinary income of 8.2B yen (YoY +3.2%), and net income of 5.8B yen (YoY +2.4%). Progress rates through Q2 stand at 47.6% for revenue, 54.1% for operating income, 56.1% for ordinary income, and 53.8% for net income. All progress metrics track slightly ahead of the standard 50% benchmark for H1, indicating satisfactory achievement trajectory. Operating income and net income progress rates of 54.1% and 53.8% respectively suggest conservative full-year guidance or potential for upward revision pending H2 performance. The 14.6% full-year revenue growth assumption implies continued double-digit expansion momentum in H2, while the deceleration in profit growth rates (operating income at 6.3%, net income at 2.4%) versus revenue growth suggests planned investments or margin normalization in the latter half. No formal guidance revision was announced this quarter. Full-year EPS forecast of 154.93 yen and dividend forecast of 61.00 yen imply projected payout ratio of 39.4% based on full-year earnings estimates.

Shareholder Returns

Annual dividend forecast stands at 61.00 yen per share for the full fiscal year. Based on H1 net income of 3.1B yen and average shares outstanding of 3,701K, the annualized payout ratio approximates 55.4% when extrapolating H1 earnings. The company executed share repurchases of 0.7B yen during H1, representing meaningful capital return alongside dividends. Combining dividends and buybacks, the total shareholder return commitment demonstrates balanced capital allocation. Free cash flow of 3.3B yen provides 1.89x coverage of dividend obligations and share repurchases, confirming sustainable return capacity from operating cash generation. The payout ratio remains within prudent levels below 60%, while total return ratio (dividends plus buybacks relative to net income) indicates management's commitment to shareholder-friendly policies supported by strong cash position of 18.2B yen.

Risk Factors

Extended receivables collection period of 120 days (DSO) presents working capital management risk and potential credit exposure. The prolonged collection cycle could constrain cash flow generation and elevate bad debt risk if customer payment difficulties emerge. Quantitatively, the 11.5B yen trade receivables balance represents 33% of total assets, amplifying the materiality of collection risk.

Revenue concentration risk exists given the absence of disclosed segment breakdowns. Without visibility into customer diversification or business line composition, the sustainability of 11.4% revenue growth remains subject to demand volatility from potentially concentrated customer relationships or specific project dependencies.

Margin compression risk as operating income growth of 9.0% lagged revenue growth of 11.4% by 2.4 percentage points. If this trend persists, the operating margin could face pressure from rising input costs or competitive pricing dynamics, requiring close monitoring of gross margin and SG&A efficiency in subsequent periods.

Industry Benchmark (Reference - Proprietary Data)

[Industry Position] (Reference - Proprietary Analysis)

The company demonstrates superior profitability metrics relative to IT and Telecom industry peers. ROE of 10.3% significantly exceeds the industry median of 5.6% (2025-Q2), positioning in the upper quartile of sector participants. Operating margin of 12.7% aligns with industry median of 14.0%, indicating competitive operational efficiency. Net profit margin of 9.0% tracks slightly below industry median of 9.2% but remains within normal range. Revenue growth of 11.4% YoY underperforms the industry median of 21.0%, suggesting room for acceleration relative to sector momentum. The company's asset turnover of 0.857x substantially outperforms industry median of 0.35x, reflecting superior asset efficiency and capital-light business characteristics. Equity ratio of 74.2% exceeds industry median of 60.2%, indicating more conservative capital structure with lower financial leverage. Current ratio of 395.5% far surpasses industry median of 7.74x, demonstrating exceptional liquidity strength. Receivables turnover of 120 days approaches industry median of 116.70 days, though remains elevated relative to best-in-class peers. The company's financial leverage of 1.35x compares favorably to industry median of 1.55x, confirming lower balance sheet risk. Operating cash flow quality and free cash flow generation place the company in strong competitive position for sustaining shareholder returns and funding organic growth initiatives.

(Industry: IT and Telecom (7 companies), Comparison: 2025-Q2 period, Source: Proprietary analysis)

Key Takeaways from Earnings

Double-digit revenue growth of 11.4% coupled with net income expansion of 13.2% demonstrates positive operating momentum, with profitability metrics of ROE 10.3% and operating margin 12.7% tracking above historical industry averages. The earnings trajectory shows sustainable characteristics supported by operating cash flow generation 1.30x above net income and conservative balance sheet structure with 74.2% equity ratio.

Strong financial positioning characterized by cash reserves of 18.2B yen and free cash flow of 3.3B yen enables flexible capital allocation, evidenced by concurrent execution of share repurchases (0.7B yen) and dividend commitments while maintaining liquidity cushion. The 1.89x free cash flow coverage of total shareholder returns confirms sustainability of capital return policy at current earnings levels.

Working capital management efficiency requires improvement as evidenced by extended receivables collection period of 120 days, which constrains cash conversion despite strong profitability. The elevated Days Sales Outstanding relative to optimal levels suggests operational focus should prioritize accounts receivable management to unlock trapped working capital and further enhance already-robust cash flow generation capabilities.

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This report was automatically generated by AI analyzing XBRL earnings data as an earnings analysis tool. This is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled from publicly available earnings data. Please make investment decisions at your own responsibility and consult professionals as needed.

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AI Financial Analysis

Executive Summary

FY2026 Q2 performance was solid, with double-digit sales and net-profit growth, although gross and operating margins compressed modestly as costs rose faster than revenue. Revenue increased 11.4% year on year to ¥3.483bn, while operating income rose 9.0% to ¥444m. Ordinary income grew faster, by 12.5% to ¥456m, supported by ¥13m of non-operating income, including subsidy income. Net income increased 13.2% to ¥312m, and basic EPS was ¥84.39. Gross profit rose to ¥1.018bn, but the gross margin declined by approximately 61bp year on year to 29.2% from 29.8%. SG&A expenses increased 9.6% to ¥574m, slightly below revenue growth, which limited but did not prevent operating-margin pressure. The operating margin was 12.8%, down approximately 27bp from 13.0% in the prior-year period, but remains within a good profitability range. The net margin was approximately 9.0%, broadly stable year on year and supported by a modestly favorable non-operating balance. Earnings quality was sound: operating cash flow of ¥405m exceeded net income of ¥312m, producing an OCF/net-income ratio of 1.30x. Free cash flow was a positive ¥326m after ¥48m of capital expenditure. Cash conversion, measured as OCF/EBITDA, was 0.83x, adequate but below the level that would indicate consistently exceptional cash realization. The balance sheet remains highly liquid, with ¥1.820bn of cash and a 395.5% current ratio. Equity increased to ¥3.016bn from ¥2.938bn in the prior-year period, while liabilities remained modest at ¥1.050bn. The full-year plan implies second-half revenue of ¥3.823bn, operating income of ¥376m, and net income of ¥263m; first-half progress is already 47.7%, 54.1%, and 54.3%, respectively. Operating-income and net-income progress are moderately ahead of the 50% seasonal benchmark, while revenue progress is marginally below it, implying that management’s plan embeds a stronger second-half sales contribution but lower second-half margins. The principal areas for monitoring are receivable collection, the sizeable asset-retirement-obligation burden, and whether continued site and service expansion can preserve margins.

Profitability Analysis

Annualized DuPont ROE is 20.7%, comprising a 9.0% net profit margin, 1.713x asset turnover, and 1.35x financial leverage. The principal support for returns is strong asset utilization and healthy operating profitability rather than aggressive leverage. Financial leverage is conservative, with a debt-to-equity ratio of 0.35x and equity representing 74.2% of assets. The annualized ROA is approximately 15.7%, calculated using annualized Q2 net income and average total assets, indicating efficient use of the asset base. The EBIT margin was 12.8%, while the EBITDA margin was 14.0%, reflecting a relatively low depreciation and amortization burden of ¥42m. Gross margin fell to 29.2% from approximately 29.8% in the prior-year period, suggesting cost of sales increased faster than revenue. SG&A rose 9.6%, slower than the 11.4% revenue increase, providing some operating leverage and partially offsetting gross-margin dilution. Consequently, operating income grew 9.0%, trailing sales growth by 2.4 percentage points, and the operating margin declined by about 27bp. The tax burden was 0.683, equivalent to a 31.6% effective tax rate, and was modestly below the 0.70 normal-tax benchmark. The interest burden of 1.028 reflects immaterial net interest cost and small non-operating income, while interest coverage above 18,000x confirms that financing expense is not a constraint. No material extraordinary item affected reported earnings, so profit growth appears predominantly operating in nature.

Growth Assessment

Revenue growth of 11.4% demonstrates continued expansion in the underlying service base. Gross profit increased 9.3% to ¥1.018bn and operating income increased 9.0% to ¥444m, showing that profit growth remained positive but lagged sales growth due to modest margin compression. Net income growth of 13.2% exceeded operating-income growth, aided by a more favorable non-operating balance than in the prior-year period. The company’s FY2026 forecast calls for revenue of ¥7.306bn, up 14.6%, operating income of ¥820m, up 6.3%, and net income of ¥575m, up 2.4%. Q2 cumulative progress is 47.7% for revenue, 54.1% for operating income, 55.4% for ordinary income, and 54.3% for net income. Profit progress is 4.1-5.4 percentage points above the standard 50% Q2 benchmark, whereas revenue is 2.3 percentage points below it. This pattern suggests the full-year forecast is achievable if the anticipated second-half sales ramp materializes, but it also implies planned second-half operating margin of about 9.8%, below the first-half 12.8%. Capital expenditure of ¥48m exceeded depreciation and amortization of ¥42m, with a capex/depreciation ratio of 1.14x, consistent with continued capacity investment rather than asset-base retrenchment. Sustainable growth therefore depends on converting such investment into revenue without further dilution of gross margin.

Financial Health

Financial health is strong. The current ratio and quick ratio are both 395.5%, supported by current assets of ¥3.144bn against current liabilities of ¥795m. Cash and deposits of ¥1.820bn alone exceed total liabilities of ¥1.050bn by ¥770m. Working capital was ¥2.349bn, providing a substantial liquidity buffer for operating needs and investment. Total equity was ¥3.016bn, or 74.2% of total assets, and total liabilities represented only 25.8% of assets. The debt-to-equity ratio of 0.35x is conservative and materially below the 2.0x level associated with aggressive leverage. There is no current-ratio warning and no excessive D/E warning. Current liabilities are well covered by cash and other current assets, limiting maturity-mismatch risk. Asset retirement obligations total ¥255m and account for approximately 25.4% of total liabilities. This is a material long-term obligation relative to the liability base and should be incorporated into assessments of the fixed-site cost structure and future restoration cash requirements. Property, plant and equipment was ¥475m, equal to 11.7% of total assets, while intangible assets were only 0.3% of assets, indicating limited balance-sheet dependence on acquired intangible value.

Notable B/S Changes

Total assets: +¥1.87bn (+4.8%) to ¥4.066bn - expansion was principally supported by higher cash and increased fixed and investment assets. Cash and deposits: +¥0.92bn (+5.3%) to ¥1.820bn - positive net cash generation preserved substantial liquidity despite investment and shareholder distributions. Property, plant and equipment: +¥0.49bn (+11.6%) to ¥4.75bn - continuing investment in operating capacity; future returns depend on utilization and margin delivery. Asset retirement obligations: +¥0.25bn (+10.7%) to ¥2.55bn - material future restoration obligation and equal to approximately 25.4% of total liabilities. Accrued expenses: +¥0.39bn (+14.3%) to ¥3.12bn - increased operating accruals should be monitored alongside working-capital cash conversion. Total equity: +¥0.78bn (+2.7%) to ¥3.016bn - earnings accumulation supported a 74.2% equity ratio despite dividends and share repurchases.

Cash Flow Quality

Cash-flow quality was favorable in FY2026 Q2. Operating cash flow was ¥405m, exceeding net income of ¥312m by ¥93m, for an OCF/net-income ratio of 1.30x; this is above the 1.0x high-quality threshold. The accruals ratio was negative 2.3%, which is consistent with cash realization being stronger than accrual earnings. EBITDA was ¥486m and OCF/EBITDA was 0.83x, indicating adequate conversion of operating profit into cash, though below the greater-than-0.9x level associated with excellent conversion. Free cash flow was ¥326m after capital expenditure of ¥48m and was sufficient to fund cash dividends paid of ¥173m and share repurchases of ¥67m during the period. Total shareholder distributions of approximately ¥240m represented about 74% of first-half FCF, leaving positive residual cash generation. Trade receivables were ¥1.149bn, broadly stable against ¥1.159bn in the prior-year period, but receivable days are slightly above 60 days. The high-receivable-days alert requires monitoring because slower collection can reduce cash conversion and increase exposure to customer credit deterioration even where reported earnings remain sound. Inventory-related supplies were limited at ¥46m, and the disclosed period movement in inventory was modest, reducing the likelihood that inventory movements were a major driver of cash flow. Investing cash outflow was ¥79m, including ¥48m of PPE purchases and ¥28m of lease-deposit payments, while financing cash outflow of ¥234m principally reflected shareholder distributions. Cash nevertheless increased by ¥92m to ¥1.820bn, preserving significant financial flexibility.

Dividend Sustainability

The Q2 dividend per share was ¥0, while the full-year forecast specifies DPS of ¥61. Based on forecast EPS of ¥154.93, the indicated dividend payout ratio is approximately 39.4%, which is within a sustainable range under the stated earnings plan. The projected annual dividend cash requirement is approximately ¥224m based on outstanding shares, compared with forecast net income of ¥575m. First-half FCF of ¥326m exceeded the ¥173m of dividends paid and ¥67m of share repurchases recorded in cash flow. Including those buybacks, first-half total shareholder return was approximately ¥240m, or about 74% of FCF; this remains below the 80% sustainability reference point. Retained earnings of ¥2.040bn and cash of ¥1.820bn provide additional support for distributions. Dividend capacity is therefore underpinned by both earnings and liquidity, although preservation of cash conversion and margin stability remains important as the company continues capital investment.

Risk Assessment

Business risks include Margin risk: gross margin declined approximately 61bp to 29.2%, and operating-income growth of 9.0% trailed revenue growth of 11.4%. Further cost inflation or lower service utilization could pressure profitability., Receivables and collection risk: receivable days are slightly above 60 days, triggering the high-receivable-days alert. This can weaken operating cash conversion and increase customer-credit exposure if collection discipline deteriorates., Expansion execution risk: capex exceeded depreciation, indicating ongoing investment. Returns depend on management’s ability to translate facility and service investment into revenue while maintaining utilization and staffing efficiency., Sector-specific service-delivery risk: operations depend on stable availability and retention of qualified personnel and on continued demand for disability-employment support services; labor-cost inflation, hiring constraints, or changes in public-policy support can affect margins and growth..

Financial risks include Asset retirement obligation risk: asset retirement obligations of ¥255m equal approximately 25.4% of total liabilities, triggering the high-ARO-ratio alert. The obligation is material because future restoration expenditures could become a larger cash-use requirement as sites mature or are exited., Forecast mix and second-half margin risk: first-half operating-income progress is 54.1% against 47.7% revenue progress, while the full-year plan implies lower second-half margins. Delivery of the sales plan without unfavorable cost absorption is necessary to meet guidance., Capital-return risk is limited but should be monitored: dividends and buybacks consumed approximately 74% of first-half FCF, leaving a positive buffer but reducing flexibility if operating cash flow weakens..

Key concerns include Whether DSO falls below the 60-day alert threshold while revenue expands., Whether gross-margin pressure stabilizes after the first-half decline., The timing and cash implications of asset-retirement obligations relative to the company’s operating-site footprint., Whether second-half revenue acceleration can be achieved while delivering the lower implied but still profitable operating-margin profile embedded in full-year guidance..

Investment Implications

Key takeaways include Revenue, operating income, ordinary income, and net income all increased year on year, with net income up 13.2% to ¥312m., Annualized ROE of 20.7% and annualized ROA of approximately 15.7% are strong, supported by healthy margins, asset turnover, and low leverage., Operating cash flow exceeded net income and generated ¥326m of free cash flow, supporting earnings quality and shareholder distributions., Liquidity is exceptionally strong, with ¥1.820bn of cash and a 395.5% current ratio., Margin compression, receivable collection, and the material relative size of asset-retirement obligations are the central financial monitoring points..

Metrics to watch include Revenue growth versus the FY2026 full-year target of 14.6%, Gross margin and operating margin versus first-half levels of 29.2% and 12.8%, Trade receivable days and operating cash flow conversion, OCF/EBITDA relative to the 0.83x first-half level, Capital expenditure and capex/depreciation relative to 1.14x, Asset retirement obligations relative to total liabilities, Progress toward FY2026 operating income of ¥820m and net income of ¥575m.

Regarding relative positioning, The company presents a financially conservative profile, combining strong annualized returns, high liquidity, positive free cash flow, and limited leverage. Its operating margin is in the good 8-15% benchmark range, while its 20.7% annualized ROE exceeds the 15% excellent-return threshold. Relative differentiation will depend on maintaining cash conversion and restoring or stabilizing gross margin as the business scales.