KYCOM HOLDINGS CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥3.48B
• Operating Income: ¥230M
• Net Income: ¥186M
• EPS: ¥39.87

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

KYCOM Holdings (9685) reported FY2026 Q2 consolidated results under JGAAP showing steady top-line growth with mixed margin dynamics. Revenue was 3,485 million yen, up 8.1% YoY, indicating healthy demand and execution in the first half. Gross profit reached 666 million yen, implying a gross margin of 19.1%, consistent with a service-heavy business model but still leaving limited room for operating leverage. Operating income was 230 million yen (+1.0% YoY), with an operating margin of 6.6%, suggesting higher cost pressure or a less favorable mix offsetting revenue growth. Ordinary income of 253 million yen exceeded operating income, implying net financial and other non-operating gains contributed positively. Net income rose 9.1% YoY to 202 million yen, with a net margin of 5.8%, evidencing decent bottom-line resilience despite modest operating leverage. ROE stands at 4.2%, driven by a 5.8% net margin, 0.43x asset turnover, and 1.70x financial leverage per DuPont analysis—below typical Japanese IT services peers that often target double-digit ROE. Liquidity appears robust with a current ratio of about 2.0x and ample working capital of 1.69 billion yen. Solvency is conservative: total liabilities of 3.47 billion yen against equity of 4.81 billion yen (liabilities-to-equity ~0.72x) and strong interest coverage of ~20.7x reflect low financial risk. Cash generation is a positive: operating cash flow of 268 million yen exceeds net income (OCF/NI ~1.33x), indicating solid earnings quality in the period. Capital expenditure and investing cash flows are not disclosed (reported as 0), limiting free cash flow assessment. Dividend data (DPS and payout) are also undisclosed for the period, so distribution stance cannot be inferred; however, balance sheet and cash generation suggest capacity. The reported effective tax rate in the summary metrics shows 0%, but based on disclosed tax expense and pre-tax profit, the effective tax rate is approximately 37%, consistent with normal levels. Overall, the company demonstrates stable growth and sound financial health, though operating leverage was muted and ROE remains modest. Key monitoring points include margin trajectory in H2, working capital discipline, and updates on dividend policy and capital allocation. Data limitations include multiple items reported as zero (unreported), including inventories, cash and equivalents, investing CF, DPS, and share counts, which constrain deeper ratio granularity.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 5.8% (202m / 3,485m)
• asset_turnover: 0.43x (3,485m / 8,155m)
• financial_leverage: 1.70x (assets/equity = 8,155m / 4,807m)
• calculated_ROE: 4.2%
• commentary: ROE is constrained by modest asset turnover and mid-single-digit net margin. Leverage is moderate and not the primary ROE driver. margin_quality:
• gross_margin: 19.1%
• operating_margin: 6.6% (230m / 3,485m)
• ordinary_margin: 7.3% (253m / 3,485m)
• net_margin: 5.8%
• EBITDA_margin: 8.5%
• tax_rate: ~36.9% (93.6m tax / ~253m pre-tax); reported 0% in summary metrics reflects non-disclosure artifact
• insights: Revenue grew 8.1% YoY while operating income grew 1.0%, indicating margin compression from SG&A or project mix. Non-operating items modestly supported ordinary income. operating_leverage: Negative in H1: operating income growth (+1.0% YoY) lagged revenue growth (+8.1% YoY). Watch cost inflation, utilization, and pricing on fixed-price projects.

Growth Assessment

revenue_sustainability: Top-line +8.1% YoY suggests healthy demand, likely driven by ongoing IT services/system integration engagements. Sustainability depends on order backlog and client budget trends (not disclosed). profit_quality: Net income +9.1% YoY outpaced operating income growth, aided by non-operating gains and a normalized tax burden. Core profitability momentum appears softer than revenue growth. outlook: Focus on H2 margin recovery via utilization and pricing. If mix shifts toward higher value-added services recur, operating margin could re-expand; otherwise, full-year leverage may remain limited.

Financial Health

liquidity:

• current_ratio: 201%
• quick_ratio: 201% (inventories undisclosed; equals current ratio by reporting)
• working_capital: 1,686 million yen
• commentary: Solid liquidity supports operating needs and seasonality. Actual cash balance is undisclosed; however, current assets of 3.36bn provide a cushion. solvency:
• liabilities_to_equity: 0.72x (proxy for D/E given lack of debt breakdown)
• interest_coverage: 20.7x (operating income / interest expense)
• equity_base: 4,807 million yen
• commentary: Low financial risk with strong coverage and moderate leverage. Equity ratio is not disclosed despite being listed as 0.0%. capital_structure: Predominantly equity-funded with manageable liabilities; interest-bearing debt specifics are not disclosed, but interest expense is small at 11.1m.

Cash Flow Quality

earnings_quality: High in the period: OCF/NI ~1.33x indicates cash conversion exceeded accounting earnings. FCF_analysis: Free cash flow cannot be reliably computed as investing cash flows (and capex) are undisclosed (reported as 0). Thus FCF in the summary should be treated as ‘not available’. working_capital: No period-to-period detail given; however, positive OCF alongside revenue growth implies either stable receivables collections or favorable payables timing.

Dividend Sustainability

payout_ratio_assessment: EPS is 39.87 yen, but DPS and payout ratio are undisclosed for the period (reported as 0). Interim payouts may not be applicable or not reported in XBRL. FCF_coverage: Not assessable due to lack of capex/investing CF disclosure. policy_outlook: Balance sheet strength and positive OCF suggest capacity for dividends, but without explicit policy or DPS data, sustainability or trajectory cannot be inferred.

Risk Assessment

Business Risks:

• Project execution risk in fixed-price system integration impacting margins
• Talent retention and wage inflation in IT services pressuring SG&A
• Customer concentration and budget timing (public/private) affecting quarterly volatility
• Competitive pricing pressure in SI and managed services
• Technology transition risk (cloud, cybersecurity) requiring ongoing investment

Financial Risks:

• Working capital swings from receivables and unbilled revenue
• Potential reliance on short-term borrowings not fully disclosed despite low interest expense
• Interest rate normalization marginally increasing finance costs
• Limited visibility on capex and investment commitments due to non-disclosure

Key Concerns:

• Muted operating leverage despite solid revenue growth
• ROE at 4.2% below peer norms for Japanese IT services
• Insufficient disclosure on cash, capex, and dividend policy limiting capital allocation assessment

Investment Implications

Key Takeaways:

• Revenue momentum is healthy (+8.1% YoY), but operating margin contracted, yielding only +1.0% YoY operating income growth
• ROE remains modest at 4.2% given 0.43x asset turnover and mid-single-digit margins
• Liquidity and solvency are strong with ~2.0x current ratio and 20.7x interest coverage
• Cash conversion is solid (OCF/NI ~1.33x), supporting balance sheet resilience
• Non-operating items aided ordinary income, but core margin recovery is critical for H2

Metrics to Watch:

• Operating margin and SG&A ratio trends in H2
• Order backlog and book-to-bill (if disclosed)
• Receivables days and unbilled balances to validate cash conversion
• Capex and investing outflows to refine FCF and payout capacity
• ROE trajectory (via margin expansion and asset efficiency)
• Dividend policy updates and payout guidance

Relative Positioning: Within Japanese small/mid-cap IT services and system integrators, KYCOM exhibits solid liquidity and low financial risk but lags peers on ROE and operating margin scalability; improving utilization and mix toward higher value-added services would be needed to close the gap.

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