TOKYO THEATRES COMPANY,INCORPORATED FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥10.12B
• Operating Income: ¥84M
• Net Income: ¥2.38B
• EPS: ¥98.74

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

Tokyo Theatres Co., Inc. (9633) reported FY2026 Q2 consolidated results under JGAAP showing solid topline growth but a sharp deterioration in operating profitability. Revenue rose 8.2% year over year to ¥10.12bn, while operating income fell 81.3% to ¥84m, compressing the operating margin to approximately 0.8%. Gross profit reached ¥2.31bn, yielding a gross margin of 22.8%, but SG&A pressures (not disclosed) appear to have absorbed most of the gross profit expansion, resulting in negative operating leverage. Ordinary income of ¥108m exceeded operating income, implying a contribution from non-operating gains or lower non-operating expenses versus prior year. Net income came in at ¥679m (down 71.5% YoY), significantly higher than ordinary income, suggesting the presence of sizeable non-recurring items below operating line (e.g., special gains or tax-related effects). The DuPont-derived ROE is 4.12%, a mid-single-digit level that reflects modest profitability combined with moderate leverage (financial leverage 1.79x) and low asset turnover (0.342x). EBITDA was ¥251m and the EBITDA margin was about 2.5%, underscoring a narrow buffer to service fixed costs. Interest coverage stood at 3.1x, adequate but thin given the low operating margin and interest expense of ¥27.3m. Liquidity is a relative strength with a current ratio of 216.8% and working capital of approximately ¥4.78bn, providing headroom for near-term obligations. The balance sheet shows total assets of ¥29.55bn, liabilities of ¥13.35bn, and equity of ¥16.49bn, equating to a debt-to-equity of 0.81x, which is moderate for the sector. Operating cash flow was ¥163m versus net income of ¥679m, an OCF/NI ratio of 0.24, indicating weak cash conversion likely influenced by working capital movements and/or non-cash gains. Financing cash outflows of ¥529m point to debt reduction and/or other financing uses, consistent with prudent balance sheet management; dividends were not paid (DPS ¥0). With dividends at zero and limited operating profit, management appears focused on preserving liquidity and strengthening financial flexibility. The combination of higher revenue, lower operating income, and higher net income than ordinary income highlights reliance on non-operating or one-off items this period. While topline momentum is encouraging, sustainability hinges on stabilizing operating margins and improving cash conversion from earnings. Data limitations exist where figures are undisclosed or reported under alternative labels (values shown as zero indicate non-disclosure), so certain inferences rely on the provided summary metrics.

Profitability Analysis

ROE of 4.12% decomposes into a 6.71% net margin, 0.342x asset turnover, and 1.79x financial leverage. The net margin is elevated relative to the low operating margin (about 0.8%), implying material non-operating or extraordinary contributions to bottom-line earnings. Gross margin at 22.8% indicates reasonable contribution from core activities, but SG&A intensity (not disclosed) drove a sharp drop in operating income (-81.3% YoY), demonstrating negative operating leverage as revenue gains did not translate to operating profit. EBITDA margin of roughly 2.5% is thin for a cinema/real-estate linked model, leaving limited cushion for interest and fixed costs. Interest coverage at 3.1x remains serviceable but offers reduced resilience if operating conditions weaken further. Ordinary income of ¥108m vs operating income of ¥84m suggests some non-operating support (e.g., equity method gains, subsidies, or investment income). The discrepancy between ordinary and net income (¥679m) points to significant below-the-line items; thus, ROE quality is mixed, with a nontrivial one-off component. Overall, profitability quality is weak at the operating level, and sustaining ROE will require recovery in operating margins and better expense discipline.

Growth Assessment

Revenue growth of +8.2% YoY to ¥10.12bn demonstrates demand resilience and/or improved pricing/volume in the core businesses. However, operating income declined sharply to ¥84m, signaling that incremental revenue was offset by higher operating costs or mix effects. Ordinary income increased versus operating income, implying non-operating contributions that are unlikely to be structural growth drivers. Net income decreased 71.5% YoY to ¥679m, underscoring volatility and possible reliance on special items to support bottom line. Without disclosure of segment details, sustainability of revenue growth is uncertain; the trajectory will depend on attendance trends, content pipeline, and any real estate-related revenues. Given the low EBITDA margin (2.5%), incremental growth needs to come with stronger cost control to translate into earnings. Outlook hinges on management’s ability to reverse negative operating leverage, normalize SG&A, and enhance unit economics (ticket, F&B, and ancillary revenue per patron, if applicable). We would watch the cadence of quarterly operating income recovery relative to revenue, as well as guidance (if available) on cost initiatives.

Financial Health

Liquidity appears strong with a current ratio of 216.8% and working capital of approximately ¥4.78bn, suggesting ample coverage of short-term liabilities. Quick ratio mirrors current ratio given inventories are undisclosed, reinforcing a liquid balance sheet profile. Solvency metrics are moderate with debt-to-equity at 0.81x and financial leverage at 1.79x, implying balanced use of liabilities relative to equity. Interest expense of ¥27.3m is manageable given current operating income, but the thin operating margin reduces buffer if conditions deteriorate. Total assets of ¥29.55bn funded by ¥13.35bn liabilities and ¥16.49bn equity indicate a conservative capital structure for the business profile. Financing cash flows were negative ¥529m, suggesting deleveraging or other financing uses that could further strengthen solvency if sustained. Certain items such as cash and equivalents and detailed debt composition are undisclosed in the provided data, so liquidity conclusions are based on aggregate ratios rather than cash balances or undrawn facilities.

Cash Flow Quality

Operating cash flow was ¥162.7m versus net income of ¥679.0m, resulting in an OCF/NI ratio of 0.24, indicating weak cash conversion for the period. The gap likely reflects working capital outflows and/or non-cash gains embedded in earnings (e.g., valuation or disposal gains). Depreciation and amortization of ¥166.8m contributed to EBITDA of ¥250.8m, but this did not translate proportionally to OCF, highlighting potential timing effects in receivables/payables or lower cash margins. Investing cash flows are undisclosed in the summary (shown as zero), so free cash flow cannot be reliably assessed; the reported FCF figure of zero should be treated as not available rather than truly zero. Financing cash outflow of ¥529.5m suggests debt repayment or other financing uses, which were funded by OCF and possibly existing liquidity. Overall earnings quality appears mixed: bottom-line strength versus operating income hints at one-offs, and low cash conversion reduces confidence in recurring cash earnings. Monitoring working capital days, recurring capex, and the proportion of non-cash items in earnings will be critical to judge future cash flow quality.

Dividend Sustainability

The company paid no dividend (DPS ¥0; payout ratio 0%), aligning with a conservative stance amid weak operating profitability and modest OCF. With investing cash flows not disclosed, free cash flow coverage of dividends cannot be determined; the reported FCF coverage of 0.00x should be interpreted as not applicable for this period. Given the sharp drop in operating income and low OCF/NI, preserving cash appears prudent. Future dividend capacity will depend on recovery in operating margin, stabilization of OCF, and visibility on maintenance capex. Policy outlook likely remains cautious until operating metrics improve and cash conversion normalizes.

Risk Assessment

Business Risks:

• Attendance and content-slate volatility affecting cinema revenues and margins
• Competition from streaming and alternative entertainment reducing foot traffic
• Cost inflation (labor, utilities, content costs) pressuring already thin margins
• Potential cyclical exposure in any real estate-related activities
• Sensitivity to consumer discretionary spending and macro conditions
• Event risk from release schedules and seasonality impacting quarter-to-quarter performance

Financial Risks:

• Thin operating margin (~0.8%) limiting buffer for shocks
• Weak cash conversion (OCF/NI 0.24) raising reliance on working capital and non-cash gains
• Interest rate and refinancing risk given interest expense and moderate leverage
• Potential dependence on non-operating or one-off items to support net income
• Visibility gaps in cash, capex, and lease obligations (undisclosed in summary)

Key Concerns:

• Sharp YoY decline in operating income despite revenue growth (negative operating leverage)
• Bottom-line supported by items below operating line; sustainability unclear
• Low EBITDA margin (2.5%) and modest interest coverage (3.1x)
• Inability to assess FCF due to undisclosed investing cash flows and cash balance
• Need for clearer path to margin recovery and consistent cash generation

Investment Implications

Key Takeaways:

• Topline grew 8.2% YoY, but operating income dropped 81.3%, compressing operating margin to ~0.8%
• ROE at 4.12% is modest and appears aided by non-operating/one-off items
• Liquidity is solid (current ratio 2.17x; working capital ~¥4.78bn) and leverage moderate (D/E 0.81x)
• Cash conversion is weak (OCF/NI 0.24), warranting caution on earnings quality
• Financing outflows (¥529m) suggest deleveraging or other balance sheet actions; dividends suspended

Metrics to Watch:

• Operating margin recovery and SG&A ratio trend
• OCF/NI and working capital days (receivables and payables turnover)
• EBITDA margin and interest coverage sustainability
• Nature and frequency of non-operating or extraordinary gains/losses
• Capex/maintenance spending and disclosures on investing cash flows
• Attendance, ticket pricing, and concession margins (if disclosed)

Relative Positioning: Relative to domestic peers in cinema and related businesses, the company exhibits healthy liquidity and moderate leverage but weaker operating profitability this period, with earnings quality skewed by non-operating items; sustained improvement will require margin normalization and stronger cash conversion.

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