ispace,inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥2.19B
• Operating Income: ¥-4.16B
• Net Income: ¥-4.46B
• EPS: ¥-42.17

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: FY2026 Q2 was weak, marked by deep operating losses and heavy cash burn despite solid top-line growth. Revenue was 21.93 (¥21.93bn-equivalent in 100M JPY units), up 63.5% YoY, indicating demand traction in lunar-related services and contracts. Gross profit was 3.83, yielding a gross margin of 17.5%, which remains thin for a project- and engineering-heavy model. SG&A rose to 45.45, driving an operating loss of -41.62 and an operating margin of approximately -189.7%. Ordinary loss was -44.59 as non-operating income of 5.69 (including interest income 0.60) could not offset non-operating expenses of 8.66 (interest expense 8.51). Net loss reached -44.63 with EPS at -¥42.17; total comprehensive loss widened further to -59.30, likely due to valuation/FX effects. Margins were deeply negative across the P&L (NI margin -203.5%); due to lack of YoY margin disclosure, basis-point expansion/compression cannot be quantified. Balance sheet leverage is extreme: total assets 351.37 versus equity 11.03 implies financial leverage of 31.86x and a D/E ratio of 30.86x. Liquidity is ample in the near term (current ratio 530.5%, cash and deposits 200.79 vs current liabilities 47.04), reflecting recent financing inflows (financing CF 147.86). Cash burn is intense: operating CF was -66.48 and capex -7.65, implying FCF around -74.13 for the period. While OCF/NI is reported at 1.49x, the absolute magnitude signals cash outflows exceed accounting losses, a caution on earnings cash conversion. Interest coverage is negative (-4.89x) as EBITDA is -40.74, underscoring vulnerability to financing costs. Retained earnings are deeply negative (-213.91), compressing equity (book value per share ~¥10.42) and limiting balance sheet flexibility. ROIC is -35.0%, well below a sustainable hurdle, indicating investments are not yet earning their cost of capital. Forward-looking, execution on contracts, cost discipline, and funding access (debt/equity) are critical to bridge to future mission milestones and commercialization. Without a step-change in gross margin or SG&A efficiency, continued losses and reliance on external financing are likely in the near to medium term.

Profitability Analysis

ROE decomposition (DuPont): Net Profit Margin (-203.5%) × Asset Turnover (0.062) × Financial Leverage (31.86x) = ROE (-404.6%). The dominant driver of the extremely negative ROE is the deeply negative net margin; asset turnover is low (capital-intensive development phase), and leverage is very high. Business drivers of margin pressure include high upfront engineering and program costs (SG&A 45.45 vs GP 3.83) and interest burden (8.51) ahead of scale. Sustainability: current losses reflect a build phase; without visible gross margin uplift and SG&A containment, the negative margin is not transient. Concerning trend flags: SG&A (45.45) materially exceeds gross profit (3.83), indicating negative operating leverage; interest expense now meaningfully erodes ordinary income.

Growth Assessment

Revenue grew 63.5% YoY to 21.93, showing commercial traction in contracts and services. However, gross margin at 17.5% remains low, suggesting limited pricing power or early-stage project mix. Operating loss widened to -41.62 as expense growth outpaced gross profit growth, implying revenue scale is not yet translating into operating leverage. Non-operating line items are net negative (5.69 in income vs 8.66 in expenses) due to interest burden, constraining earnings even if operations improve. Outlook hinges on execution of pipeline contracts, milestone recognition, and potential shift toward higher-margin offerings (payload delivery, data, engineering services). Near-term growth quality is mixed: top-line expanding, but profitability and cash conversion are weak. Given the high leverage, growth must come with margin uplift to be value-accretive.

Financial Health

Liquidity: strong near-term with current assets 249.53 vs current liabilities 47.04 (current ratio 530.5%; quick ratio equivalent given limited inventories). Cash and deposits are 200.79, more than covering short-term loans of 16.90. Solvency: highly leveraged—total liabilities 340.33 vs equity 11.03 (D/E 30.86x); explicit warning triggered. Financial leverage (A/E) is 31.86x; equity ratio ~3.1% (11.03/351.37), indicating thin capitalization. Maturity profile risk: long-term loans 291.77 dominate liabilities; while current liquidity is comfortable, refinancing and covenant risks are material given negative EBITDA and interest coverage. Off-balance sheet obligations: none reported in the provided data.

Cash Flow Quality

OCF was -66.48 versus net income -44.63, resulting in a reported OCF/NI of 1.49x; while this exceeds the 0.8 threshold, the absolute cash burn exceeds accounting loss, indicating weak cash conversion and likely working capital outflows or advance project spending. Capex was -7.65, implying FCF approximately -74.13 for the period, not covered by operating inflows. Financing CF of 147.86 funded operations and bolstered cash, but this is not a sustainable source absent clearer path to positive OCF. No explicit signs of working capital manipulation are visible from the limited disclosures, but the gap between OCF and NI suggests timing effects and growth-related cash needs.

Dividend Sustainability

No dividends are reported. Given net loss (-44.63), negative OCF (-66.48), and FCF (~-74.13), distribution capacity is effectively zero. With D/E at 30.86x and interest coverage negative, any dividend initiation would be imprudent until profitability and cash flows normalize. Policy outlook: management is likely to prioritize liquidity and mission execution over shareholder distributions in the medium term.

Risk Assessment

Business Risks:

• Execution risk on complex lunar/space missions and technology milestones.
• Revenue timing and concentration risk tied to milestone-based contracts.
• Low gross margin (17.5%) and negative operating leverage constrain scalability.
• Supply chain and partner dependency for critical components and launch windows.
• Regulatory/export control and geopolitical constraints affecting space-related commerce.

Financial Risks:

• High leverage (D/E 30.86x; A/E 31.86x) with thin equity base (equity ratio ~3.1%).
• Negative interest coverage (-4.89x) and substantial interest expense (8.51).
• Persistent negative OCF (-66.48) and FCF (~-74.13) requiring external funding.
• Refinancing and covenant risk given long-term loans 291.77 and negative EBITDA.
• Potential dilution risk if equity financing is pursued to rebuild capitalization.

Key Concerns:

• Sustained net losses (NI margin -203.5%) and ROIC at -35.0%.
• Retained earnings deficit (-213.91) limiting balance sheet flexibility.
• Sensitivity to currency/valuation swings (comprehensive loss -59.30).
• Dependence on continued access to capital markets for liquidity.
• Data limitations on cost structure (SG&A breakdown unreported) reduce visibility into fixed vs variable cost levers.

Investment Implications

Key Takeaways:

• Top-line growth is strong (+63.5% YoY), but profitability is deeply negative across all levels.
• Gross margin at 17.5% and SG&A of 45.45 drive an operating margin near -190%.
• Liquidity appears ample near term (cash 200.79; current ratio 530.5%), supported by recent financing.
• Balance sheet leverage is extreme (D/E 30.86x), with thin equity (book value per share ~¥10.42).
• OCF and FCF are significantly negative, implying reliance on continued external funding.
• Interest burden (8.51) is meaningful and rising vs earnings capacity.
• ROE (-404.6%) and ROIC (-35.0%) reflect pre-scale, investment-heavy stage with high execution risk.

Metrics to Watch:

• Order backlog and milestone recognition cadence.
• Gross margin trajectory and mix shift toward higher-margin services.
• SG&A growth vs revenue growth to assess operating leverage.
• Operating cash flow and FCF trend; cash runway vs quarterly burn.
• Interest coverage and net debt evolution; refinancing timelines.
• Equity ratio and potential capital raising plans (debt vs equity).

Relative Positioning: Within early-stage space/aerospace peers, ispace shows stronger revenue momentum but materially weaker profitability and higher leverage. The company’s immediate strength is liquidity from recent financing, while its principal disadvantage is thin equity and negative operating leverage versus peers that maintain lower debt intensity.

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