CROPS CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥31.23B
• Operating Income: ¥1.42B
• Net Income: ¥326M
• EPS: ¥-2.13

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

CROPS (9428) delivered solid top-line growth and a sharp recovery in core profitability in FY2026 Q2 (cumulative), while bottom-line was pulled into a small net loss by non-operating factors, likely extraordinary losses and/or tax effects. Revenue rose 6.9% year over year to 31,231,000,000, supported by improved gross profit of 7,209,000,000 and a gross margin of 23.1%. Operating income surged 79.1% YoY to 1,419,000,000, lifting the operating margin to roughly 4.5%, evidencing better operating leverage and cost execution. Ordinary income reached 1,460,000,000, indicating stable financial costs and non-operating items; interest expense was modest at 6,000,000 with an interest coverage ratio of 236.5x. Despite strong ordinary profit, net income was a slight loss of -20,000,000 (EPS -2.13), implying c. 1.06 billion yen of extraordinary losses and/or tax-related effects, as income tax expense of 421,000,000 outweighed the small positive pretax after such items. Operating cash flow was positive at 1,098,000,000, demonstrating cash earnings alignment with improved operating results, although the OCF/Net Income ratio (-54.9x) is inflated by the very small negative net income base. The balance sheet remains sound: total assets were 35,535,000,000, liabilities 21,761,000,000, and equity 14,176,000,000, implying an estimated equity ratio of about 39.9% despite the reported 0.0% (unreported in XBRL). Liquidity looks comfortable with current assets of 21,067,000,000 against current liabilities of 11,729,000,000, yielding a current ratio of 179.6% and working capital of 9,338,000,000. Leverage is moderate with debt-to-equity (using total liabilities as proxy) of 1.54x and financial leverage (assets/equity) of 2.51x. DuPont shows asset turnover of 0.879 and financial leverage of 2.51, but the net margin of -0.06% drives a small negative ROE of -0.14% for the period. EBITDA was 1,586,000,000, implying an EBITDA margin of about 5.1%, consistent with a recovery in core operations. Financing cash flow was an outflow of -465,000,000, likely reflecting debt repayments or other financing activities, while investing cash flow was shown as 0 (unreported), limiting visibility on capex and free cash flow. Annual DPS is reported as 0.00, and payout metrics appear as 0.0% due to the net loss and unreported FCF, so dividend policy signals cannot be inferred this quarter. Overall, the quality of earnings at the operating level improved markedly, but one-off items and/or tax effects suppressed bottom-line results. The outlook hinges on sustaining topline growth and margin discipline while normalizing extraordinary and tax impacts.

Profitability Analysis

ROE decomposition indicates profitability was burdened by one-off items: net margin -0.06%, asset turnover 0.879, and financial leverage 2.51, yielding a calculated ROE of -0.14%. Operating margin improved to roughly 4.5% (1,419,000,000 operating income on 31,231,000,000 revenue), up significantly YoY, supported by a stable gross margin of 23.1%. EBITDA margin of 5.1% reflects controlled operating costs and measured D&A (167,000,000), suggesting asset-light characteristics in core operations. Ordinary margin of ~4.7% (1,460,000,000 over revenue) shows low financing drag, with interest expense at only 6,000,000 and interest coverage of 236.5x. The negative net margin is inconsistent with the strength at the operating and ordinary levels, implying approximately 1.06 billion yen of extraordinary losses and/or valuation allowances that raised the effective tax burden. Operating leverage is improving as revenue growth of 6.9% translated into a 79.1% YoY jump in operating income, indicating fixed cost absorption and better sales mix. Margin quality appears stronger in recurring operations, but headline net profitability will remain volatile if extraordinary/tax items persist.

Growth Assessment

Revenue expanded 6.9% YoY to 31,231,000,000, indicating healthy demand across core businesses. The step-change in operating income (+79.1% YoY) suggests improved mix and cost control, not just volume growth. Gross profit of 7,209,000,000 supports the view that topline growth is translating into value-added sales rather than pass-through. Ordinary income of 1,460,000,000 confirms recurring profitability momentum, while the net loss of -20,000,000 reflects non-recurring drags rather than structural weakness in operations. Sustainability of growth will depend on maintaining the 23.1% gross margin and ~4.5% operating margin while scaling. Profit quality is solid at the operating cash flow level (OCF 1,098,000,000), aligning with reported operating income, although lack of capex disclosure (investing CF shown as 0/unreported) tempers visibility on FCF. Outlook-wise, if extraordinary losses and tax effects normalize, net income should converge toward ordinary profit trends, barring demand shocks. Near-term focus should be on segment mix, cost containment, and avoidance of new one-off charges.

Financial Health

Liquidity is comfortable: current assets 21,067,000,000 vs current liabilities 11,729,000,000 yield a current ratio of 179.6% and working capital of 9,338,000,000. Quick ratio equals the current ratio because inventories are unreported (shown as 0); cash and receivables composition is not disclosed, so immediate liquidity specifics are limited. Solvency is solid with total equity of 14,176,000,000 against total assets of 35,535,000,000, implying an estimated equity ratio of ~39.9% (reported 0.0% is unreported). Debt-to-equity stands at 1.54x using total liabilities as a proxy for debt; the modest interest expense (6,000,000) suggests low interest-bearing debt or low rates. Financial leverage of 2.51x (assets/equity) is moderate. No cash and equivalents figure was provided (shown as 0/unreported), but positive OCF and strong working capital suggest adequate funding for operations. Overall, the capital structure appears balanced with headroom to absorb shocks, though more detail on interest-bearing debt composition would improve assessment.

Cash Flow Quality

Earnings quality is supported by positive operating cash flow of 1,098,000,000 versus an accounting net loss of -20,000,000, indicating that the loss was driven by non-cash/one-off items or tax effects. The OCF/Net Income ratio of -54.9x is not economically meaningful due to the small negative denominator; a better lens is OCF/Operating Income at ~0.77x, which is reasonable mid-year. Free cash flow cannot be reliably computed because investing cash flow is shown as 0 (unreported) and capex details are missing. Working capital dynamics are not disclosed in detail, but the sizable working capital balance (9,338,000,000) alongside positive OCF suggests no abnormal cash tie-ups. D&A is modest at 167,000,000, consistent with an asset-light to moderately capital-intensive model. Financing cash flow was -465,000,000, implying debt repayment or other financing uses, but with no dividends reported in the period. Overall, cash conversion from operations appears healthy; clarity on capex and cash balance would refine FCF assessment.

Dividend Sustainability

Annual DPS is reported as 0.00, and payout ratio as 0.0% due to the net loss; however, these are not necessarily indicative of full-year policy. With OCF at 1,098,000,000 and investing CF unreported, FCF coverage cannot be determined (reported FCF coverage 0.00x reflects data gaps). Balance sheet capacity (estimated equity ratio ~39.9% and moderate leverage) suggests room for distributions over a full year if net profit normalizes. Near-term, management may prioritize balance sheet flexibility until extraordinary/tax impacts are clarified. Dividend outlook therefore hinges on normalization of bottom-line profitability and visibility on capex and cash balances.

Risk Assessment

Business Risks:

• Margin sensitivity to sales mix and pricing in core service lines
• Execution risk in sustaining operating leverage as revenue growth normalizes
• Dependence on partner ecosystems and potential commission/fee changes
• Competition-driven pressure on gross margin (23.1%) and operating margin (~4.5%)
• Potential demand volatility impacting asset turnover (0.879)

Financial Risks:

• Extraordinary losses (~1.06 billion yen implied) leading to net losses despite strong ordinary profit
• Tax-related volatility (income tax expense 421,000,000 with a near breakeven net result)
• Limited disclosure on cash and equivalents (shown as 0/unreported) and capex (investing CF unreported)
• Refinancing or repayment needs implied by financing CF outflow of -465,000,000
• Leverage at 1.54x liabilities/equity and 2.51x financial leverage, though interest burden is currently low

Key Concerns:

• Persistence of extraordinary losses that depress net income
• Normalization of effective tax rate from an anomalous quarter
• Visibility on capex and free cash flow given unreported investing CF
• Sustainability of operating margin gains after a strong rebound

Investment Implications

Key Takeaways:

• Core profitability rebounded strongly: operating income +79.1% YoY to 1,419,000,000 and ordinary income 1,460,000,000
• Net loss of -20,000,000 driven by non-operating factors (implied extraordinary losses and/or tax effects), not core weakness
• Healthy liquidity (current ratio 179.6%) and moderate leverage (financial leverage 2.51) support operational resilience
• Positive OCF of 1,098,000,000 indicates solid cash conversion; FCF visibility limited due to unreported investing CF
• Estimated equity ratio ~39.9% (reported 0.0% is unreported), indicating a relatively sound balance sheet

Metrics to Watch:

• Extraordinary gains/losses and reconciliation from ordinary income to net income
• Effective tax rate normalization and any valuation allowance movements
• Segment mix impacts on gross margin (23.1%) and operating margin (~4.5%)
• Capex and investing cash flows to gauge sustainable FCF
• Working capital movements and OCF/Operating Income conversion
• Interest-bearing debt levels and cost of debt (currently low interest expense)

Relative Positioning: Within its peer set of diversified service/agency businesses, CROPS exhibits improving core margins and strong interest coverage, with a balance sheet that appears reasonably capitalized. Near-term relative positioning hinges on demonstrating that the net loss was one-off and maintaining operating leverage as growth normalizes.

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