IX Knowledge Incorporated FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥12.35B
• Operating Income: ¥1.08B
• Net Income: ¥668M
• EPS: ¥86.09

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

For FY2026 Q2, アイエックス・ナレッジ株式会社 delivered solid mid-year results with revenue of ¥12.354bn (+11.2% YoY) and operating income of ¥1.084bn (+15.9% YoY), indicating positive operating leverage and margin expansion. Gross margin was 18.5%, while operating margin reached 8.8%, supported by disciplined cost control and a favorable mix. Net income rose 23.3% YoY to ¥823m, lifting net margin to 6.66%, outpacing top-line growth. DuPont metrics are balanced: asset turnover of 0.796 and financial leverage of 1.45 combine with the net margin to yield an ROE of 7.67%, consistent with the reported figure. Leverage remains conservative with total liabilities of ¥5.011bn versus equity of ¥10.725bn (debt-to-equity 0.47x), implying resilience and capacity for investment. The reported equity ratio is shown as 0.0% in the dataset, but based on the balance sheet, the implied equity ratio is approximately 69.1% (equity/total assets), underscoring a strong capital base. Liquidity is ample with a current ratio of 295% and negligible inventories, supporting a quick ratio of 295%. Operating cash flow of ¥640m equates to 0.78x of net income, a reasonable mid-year conversion for an SI/services model, though it suggests some working capital absorption. EBITDA of ¥1.104bn and a minuscule interest burden (¥0.6m) produce an interest coverage ratio of roughly 1,825x, highlighting minimal financial risk. The effective tax rate is listed as 0.0%, but using the provided income tax (¥313m) and net income (¥823m), the implied effective tax rate is around 27–28%, consistent with normal domestic taxation. Cash and equivalents, investing cash flow, DPS, and share counts are shown as zero, which reflects non-disclosure rather than actual zero values; conclusions are therefore drawn only from reported, non-zero data. Overall profitability trends and balance sheet strength are favorable, with improving margins and low leverage. Cash flow quality is adequate but should be monitored to ensure earnings translate into cash as the year progresses. Dividend capacity appears supported by fundamentals, though payout data are not disclosed at this stage. Key sensitivities include project execution, labor cost inflation, and timing of customer acceptances, which can affect working capital and interim cash generation. Despite the data limitations, the company’s mid-year trajectory points to sustainable growth with prudent financial management.

Profitability Analysis

ROE decomposition: Net profit margin of 6.66% × asset turnover of 0.796 × financial leverage of 1.45 yields a calculated ROE of 7.67%, matching the reported figure. Margin quality: gross margin 18.5% and operating margin 8.8% indicate decent value capture for a systems integration/software services mix; D&A is modest (¥20m), so operating profit is largely cash-earnings based. Expense discipline is evident as operating income growth (+15.9% YoY) exceeds revenue growth (+11.2% YoY), pointing to operating margin expansion. Ordinary income (¥1.145bn) slightly exceeds operating income, aided by minimal interest cost (¥0.6m), so below-the-line items are benign. Net margin benefits from operational improvements and a normalized tax rate (~27–28% implied). Operating leverage: revenue growth translated into faster operating profit growth, suggesting utilization gains and better project mix; however, sustainability depends on maintaining high chargeability and controlling subcontracting ratios. EBITDA margin of 8.9% is close to operating margin due to low D&A, emphasizing human-capital intensity rather than asset intensity. Overall, profitability is robust for the period, with scope for incremental margin improvement if scale efficiencies persist.

Growth Assessment

Top-line growth of 11.2% YoY indicates healthy demand, likely underpinned by ongoing digital transformation projects in finance, public sector, and enterprise clients. The translation of revenue growth into +15.9% YoY operating income suggests improved mix/utilization and effective cost management. Net income growth of 23.3% YoY reflects both operating leverage and stable below-the-line items. Sustainability: Mid-year growth appears broad-based, but visibility depends on backlog and order intake trends (not disclosed). In the SI/services industry, 2H seasonality and acceptance timing are significant; continued double-digit growth will require steady bookings and delivery capacity. Profit quality is supported by low interest burden and normalizing tax rate; however, project execution risk and wage inflation could compress margins if not passed through. Outlook: With a strong balance sheet and minimal financial constraints, the company has capacity to invest in talent, tools, and potentially selective M&A; the main gating factor is resource availability and pricing power. Near-term growth should track enterprise IT budgets and public-sector digital modernization, with potential moderation if clients delay projects. The improving operating margin trend offers a buffer against any revenue volatility.

Financial Health

Liquidity is strong: current assets ¥10.820bn vs current liabilities ¥3.664bn yields a current ratio of 295% and a quick ratio of 295%, supported by negligible inventories (¥1.5m). Working capital stands at ¥7.155bn, providing flexibility to absorb project timing effects. Solvency is robust with total liabilities of ¥5.011bn and equity of ¥10.725bn, resulting in a debt-to-equity ratio of 0.47x and an implied equity ratio of ~69.1% (despite the dataset’s 0.0% placeholder). Interest expense is de minimis (¥0.6m) with coverage of ~1,825x, indicating very low refinancing risk. Asset structure is light, consistent with services: D&A is only ¥20m in the period, and asset turnover of 0.796 is respectable. Overall, the capital structure is conservative and supports resilience through cycles.

Cash Flow Quality

Operating cash flow of ¥640m equates to 0.78x of net income (¥823m), a reasonable but not outstanding conversion for 1H; likely reflects receivables build and unbilled work typical for project-based businesses. Free cash flow is not derivable from the provided dataset because investing cash flows are shown as zero (non-disclosure); thus, FCF is not assessed here. Earnings quality is supported by low non-cash charges (D&A ¥20m) and minimal financing distortions (interest ¥0.6m). Working capital management remains a key lever; maintaining tight collections and milestone billings will be important to lift OCF/NI toward or above 1.0 by year-end. With a strong liquidity base, the company can accommodate interim working capital swings without stressing the balance sheet.

Dividend Sustainability

Dividend per share and payout ratio are shown as 0.00, which indicates non-disclosure at this stage rather than actual zeros. Based on fundamentals (net income ¥823m in H1, strong equity base, low leverage), dividend capacity appears sound; however, without disclosed DPS or capital allocation guidance, we cannot quantify payout sustainability. FCF coverage cannot be calculated due to missing investing cash flow data. Policy outlook likely remains conservative, balancing stable returns with investments in human capital and delivery capability; confirmation depends on full-year guidance and board resolutions.

Risk Assessment

Business Risks:

• Project execution risk leading to cost overruns or acceptance delays
• Labor market tightness and wage inflation impacting margins
• Client IT budget volatility, especially in cyclical sectors
• Pricing pressure in competitive SI engagements
• Concentration risk if revenue is reliant on a few large clients or sectors
• Seasonality and back-end loaded acceptances affecting interim results

Financial Risks:

• Working capital swings reducing cash conversion in certain quarters
• Potential increase in subcontracting costs compressing gross margins
• Limited operating leverage if utilization falls
• Tax rate variability versus assumptions

Key Concerns:

• OCF/Net income at 0.78 indicates room to improve cash conversion
• Dependence on sustained bookings/backlog (not disclosed) to maintain double-digit growth
• Visibility on dividend policy and capital allocation is limited mid-year

Investment Implications

Key Takeaways:

• Double-digit revenue growth with faster operating profit growth evidences positive operating leverage
• Margins improved to 18.5% gross and 8.8% operating; net margin at 6.66%
• ROE of 7.67% is supported by steady asset turnover and modest leverage
• Balance sheet is strong with implied equity ratio ~69% and debt-to-equity 0.47x
• Cash conversion is adequate but should strengthen in 2H to de-risk earnings quality
• Interest burden is negligible, preserving financial flexibility

Metrics to Watch:

• Order backlog and bookings growth (not disclosed here)
• Operating margin trajectory and subcontracting ratio
• OCF/Net income and receivables days through 2H
• Headcount, utilization, and wage inflation trends
• Effective tax rate versus implied ~27–28%
• Capital expenditure and investment cash flows (to assess FCF and dividend capacity)

Relative Positioning: Within Japan’s mid-sized SI/services peer set, the company demonstrates above-average balance sheet strength, improving mid-teens operating income growth on low-teens revenue growth, and disciplined cost control, positioning it favorably on profitability resilience while maintaining conservative leverage.

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