Hmcomm Inc. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥765M
• Operating Income: ¥9M
• Net Income: ¥1M
• EPS: ¥0.40

Income Statement

Balance Sheet

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 FY2025 Q3 (single-entity, JGAAP), Ｈｍｃｏｍｍ株式会社 posted revenue of ¥765.0m (+2.8% YoY), with a high gross margin of 48.6% but a sharp collapse in profitability at the operating and bottom-line levels. Operating income fell to ¥9.0m (-92.7% YoY), and net income was ¥1.0m (-98.9% YoY), indicating significant margin compression and/or one-off costs below gross profit. Ordinary income of ¥10.0m exceeded operating income, implying net non-operating income of roughly ¥1.3m despite interest expense of ¥0.27m. The reported income tax was a negative ¥36.88m (tax credit), which, combined with the gap between ordinary income and net income, suggests material below-the-line items (likely extraordinary losses) offset by tax effects; detailed breakdowns are not disclosed. Asset turnover stands at 0.411x and financial leverage is very low at 1.08x, resulting in a thin DuPont-calculated ROE of 0.06%. Liquidity is exceptionally strong with a current ratio of 1,030% and working capital of ¥1.658bn, reflecting a near debt-free balance sheet (debt-to-equity 0.10x) and a large cushion of current assets. The equity base is sizable at ¥1.731bn against total assets of ¥1.862bn, indicating a conservative capital structure. Despite the safety provided by the balance sheet, the drastic deterioration in operating income highlights weak operating leverage and/or elevated SG&A or project cost issues in the quarter. Interest coverage remains comfortable at 33.8x, consistent with minimal financial risk. Cash flow data (OCF/ICF/FCF) and depreciation are not disclosed (zeros indicate unreported), limiting assessment of earnings quality and cash conversion. Dividend is currently nil (DPS ¥0.00; payout 0%), which is consistent with very low earnings and the lack of cash flow disclosure. Overall, the company exhibits strong liquidity and solvency, but profitability volatility and the presence of a large tax credit alongside weak net profit raise questions about the underlying quality and sustainability of earnings. Revenue growth is modest and appears organic, but progress is not translating into profits this period. Near-term outlook hinges on normalization of operating expenses and clarity on extraordinary items and tax effects. Data limitations, particularly around cash flows and depreciation, constrain precision in cash-based assessments and margin diagnostics.

Profitability Analysis

ROE_decomposition: ROE 0.06% = Net margin 0.13% × Asset turnover 0.411 × Financial leverage 1.08. Very low net margin is the primary drag; asset turnover is moderate; leverage contributes minimally by design. margin_quality: Gross margin is strong at 48.6%, but operating margin compressed to ~1.2% (¥9.0m/¥765.0m), indicating significant SG&A pressure and/or project cost overruns. Ordinary income slightly above operating income suggests small non-operating gains net of interest. The negative tax (¥36.88m credit) and the gap from ordinary income to net income imply sizable extraordinary losses and tax effects; absence of detailed line items limits attribution. operating_leverage: Revenue grew +2.8% YoY while operating income fell -92.7% YoY, evidencing negative operating leverage in the period. Fixed cost absorption likely deteriorated; a small change in revenue led to an outsized decline in operating profit, suggesting elevated fixed costs and/or one-off cost items within SG&A.

Growth Assessment

revenue_sustainability: Top-line growth of +2.8% YoY is modest and likely organic; no segment detail disclosed to assess mix or recurring components. profit_quality: Profitability is weak with net margin at 0.13%. The presence of a large tax credit and an implied extraordinary loss reduces transparency of underlying earnings quality in this quarter. outlook: Stabilization depends on normalizing SG&A, recovering operating margin back toward historical levels implied by the robust gross margin, and resolving any extraordinary items. With low leverage and ample liquidity, the company has capacity to invest or weather volatility, but translating gross margin into operating profit is the key swing factor.

Financial Health

liquidity: Current ratio 1,030.5% and quick ratio 1,030.5% reflect very strong short-term liquidity; working capital totals ¥1,657.7m. Inventories are not disclosed (0 reported). solvency: Debt-to-equity at 0.10x and financial leverage of 1.08 indicate low balance-sheet risk. Interest coverage is 33.8x, consistent with minimal financial burden. capital_structure: Total assets ¥1.862bn vs total liabilities ¥178.1m and equity ¥1.731bn imply a conservative structure with substantial equity funding. The reported equity ratio figure is not disclosed, but the balance sheet composition indicates high equity backing.

Cash Flow Quality

earnings_quality: Operating, investing, and financing cash flows are not disclosed this period (reported as 0), preventing assessment of cash conversion, accrual intensity, or reinvestment efficiency. FCF_analysis: Free cash flow cannot be evaluated without OCF and capex detail. Depreciation is also unreported, limiting EBITDA and non-cash add-back analysis. working_capital: Working capital is large (¥1.658bn), supporting liquidity; however, period-to-period movements and their impact on cash are not available.

Dividend Sustainability

payout_ratio_assessment: DPS is ¥0.00 with a payout ratio of 0%. Given minimal net income (¥1.0m) and absent cash flow data, a conservative stance on dividends aligns with current earnings capacity. FCF_coverage: FCF coverage cannot be assessed because OCF and capex are not disclosed. policy_outlook: With strong balance sheet but weak profitability, continuation of a cautious dividend policy appears consistent until operating margins recover and cash flow visibility improves.

Risk Assessment

Business Risks:

• Negative operating leverage due to high fixed-cost base or elevated SG&A.
• Potential one-off or extraordinary losses impacting reported profits.
• Margin volatility despite high gross margin, indicating cost control or pricing pressure risks.
• Limited revenue growth (+2.8% YoY) may constrain operating scale benefits.
• Customer/project concentration risk (not disclosed but common in small-cap, service-heavy models).

Financial Risks:

• Earnings sensitivity to operating expense spikes given low operating margin.
• Tax credit reliance in this quarter; reversal risk in future periods.
• Cash flow visibility risk due to non-disclosure of OCF/FCF.
• Potential impairment or valuation losses (inferred from gap between ordinary and net income).

Key Concerns:

• Operating income collapsed to ¥9.0m (−92.7% YoY) despite revenue growth.
• Large negative tax (¥36.88m credit) alongside low net profit, implying complex below-the-line items.
• Absence of cash flow and depreciation disclosures limits assessment of earnings quality and sustainability.

Investment Implications

Key Takeaways:

• Top line grew modestly (+2.8% YoY) but profitability deteriorated sharply.
• Gross margin remains robust at 48.6%, indicating underlying value-add, but costs below gross profit escalated.
• Balance sheet is very strong (D/E 0.10x; current ratio ~10x), reducing financial risk.
• Net margin is extremely thin at 0.13%, driving a very low ROE of 0.06%.
• Ordinary income exceeded operating income, showing minor net non-operating gains despite interest expense.
• Tax credit materially influenced bottom-line; extraordinary items likely affected results.
• Cash flow metrics are not disclosed, constraining assessment of cash conversion and dividend capacity.

Metrics to Watch:

• Operating margin recovery and SG&A ratio versus revenue.
• Breakdown of non-operating and extraordinary items; clarity on tax credits.
• Cash flow from operations and capex to establish FCF trajectory.
• Client/project mix and backlog indicators (if disclosed) to gauge revenue durability.
• Receivables and other working capital movements impacting cash.
• Any guidance on cost containment measures or restructuring.

Relative Positioning: The company appears asset-light with high liquidity and minimal leverage relative to many TSE small caps, but it lags on profitability consistency this quarter; near-term positioning hinges on restoring operating leverage while maintaining the strong balance sheet.

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