ImageONE Co.,Ltd. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥866M
• Operating Income: ¥-410M
• Net Income: ¥-559M
• EPS: ¥-50.46

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

Image One (TSE:2667) reported FY2025 Q4 (non-consolidated, JGAAP) results showing a severe contraction in revenue and continued deep losses. Revenue fell 44.6% year over year to ¥866 million, and cost of sales exceeded revenue, producing a negative gross profit of ¥115.9 million and a gross margin of -13.4%. Operating income was a loss of ¥410 million (flat YoY per the disclosure), implying that SG&A and/or project cost controls offset some of the revenue shortfall, but profitability remained materially negative. Ordinary income deteriorated further to a loss of ¥447 million, reflecting non-operating burdens including interest and other items. Net income came in at a loss of ¥559 million, translating to an EPS of -¥50.46 on a single-entity basis. DuPont metrics highlight a very weak earnings profile: net margin was -64.55%, asset turnover 0.622x, and financial leverage 1.94x, yielding a calculated ROE of -77.96%. Balance sheet scale is modest, with total assets of ¥1,392 million and total equity of ¥717 million, implying an equity-to-asset ratio of roughly 51.5% despite the reported equity ratio field being unreported. Liquidity appears adequate on headline ratios: current assets of ¥1,288 million against current liabilities of ¥825 million produce a current ratio of 156.1% and working capital of ¥463 million; however, the mix and liquidity of current assets are unclear because cash and inventories were unreported. Cash generation remains a key concern: operating cash flow was -¥447 million and free cash flow was -¥508 million, both requiring financing inflows of ¥517 million to bridge the shortfall. EBITDA was -¥401 million and depreciation a modest ¥8.7 million, indicating an asset-light model but high fixed cost absorption issues under reduced volumes. Interest expense was small at ¥0.38 million, but with negative EBIT the interest coverage ratio is deeply negative, signaling no room for debt-funded expansion without a turnaround. The company paid no dividend (DPS ¥0) and recorded a 0% payout ratio, consistent with preserving capital under losses. Reported metrics on equity ratio, cash and equivalents, inventories, and share counts were not disclosed in the XBRL and show as zero; thus, conclusions on cash buffers and per-share book value are constrained. Overall, the quarter reflects a stressed profit structure due to negative gross margin, significant revenue contraction, and ongoing cash burn that is currently being financed by external sources. Near-term improvement hinges on restoring positive gross margins through pricing, mix, or cost pass-through, and on stabilizing order intake to improve capacity utilization and operating leverage.

Profitability Analysis

ROE decomposition under DuPont shows: net profit margin -64.55%, asset turnover 0.622x, and financial leverage 1.94x, producing a calculated ROE of -77.96%. The negative margin is the dominant driver, overwhelming modest asset turnover and moderate leverage. Gross profit was -¥115.9 million on ¥866 million of revenue, confirming cost of sales overruns and/or pricing/mix challenges; this undermines margin quality at the very top of the P&L. Operating income loss of ¥410 million versus a gross loss of ¥116 million implies sizeable SG&A that could not be flexed enough to match the revenue decline, although the flat YoY operating loss suggests some cost response. EBITDA of -¥401 million, with depreciation of only ¥8.7 million, indicates the loss is primarily operating (cash) rather than accounting-driven, raising urgency for structural margin fixes. Ordinary loss of ¥447 million was ¥37 million worse than operating loss, indicating non-operating drags (including interest expense of ¥0.38 million and likely other non-operating items). The effective tax rate rounds to 0% due to net losses. Operating leverage is unfavorable at current volumes: a 44.6% revenue decline with an unchanged operating loss suggests fixed cost absorption issues; any recovery in volume should improve margins disproportionately, but downside sensitivity remains high if volumes weaken further.

Growth Assessment

Revenue declined 44.6% YoY to ¥866 million, pointing to a sharp contraction in demand, project timing slippage, or competitive/pricing pressures. Given the negative gross margin, revenue quality is weak; topline at unfavorable pricing/mix is currently value destructive. Profit quality is poor, with losses at gross, operating, ordinary, and net levels, and EBITDA deeply negative. Without disclosed backlog or order intake data, visibility on the sustainability of revenue is limited; single-entity results may also reflect customer concentration and lumpy project recognition typical of systems/integration businesses. The flat YoY operating loss implies management took cost actions, but not enough to restore profitability at current scale. Outlook hinges on re-establishing positive gross margins (through better procurement, pass-through pricing, project selection) and on rebuilding a stable pipeline. Any recovery in healthcare/IT capex cycles or successful shift to higher-margin solutions could lift both growth and profitability. Absent evidence of near-term margin repair, growth alone would not ensure earnings improvement unless pricing discipline and cost controls are in place.

Financial Health

Total assets were ¥1,392 million and total equity ¥717 million, implying an equity ratio of roughly 51.5% (calculated), despite the equity ratio field being unreported. Total liabilities stood at ¥833.7 million, yielding a debt-to-equity (liabilities/equity) metric of 1.16x. Liquidity on paper is adequate with current assets of ¥1,288.4 million and current liabilities of ¥825.2 million, resulting in a current ratio of 156.1% and working capital of ¥463.2 million. The quick ratio also shows as 156.1% due to inventories being unreported; actual quick liquidity may be lower if receivables dominate. Cash and equivalents were unreported, limiting assessment of immediate cash buffers and runway. Interest expense is minimal at ¥0.38 million, and there is no disclosed breakdown of interest-bearing debt vs. other liabilities; covenant and refinancing risk cannot be fully assessed. Persistent losses and negative OCF indicate solvency pressure over time unless profitability recovers or external financing remains available.

Cash Flow Quality

Operating cash flow was -¥447 million versus net income of -¥559 million, giving an OCF/NI ratio of 0.80; this suggests losses are partly cash in nature but include some non-cash items and/or favorable working capital movements. Free cash flow was -¥508 million after ¥61 million of investing outflows, indicating the business consumed significant cash even with low capex/intangibles spend. EBITDA of -¥401 million aligns with negative OCF, reinforcing weak cash earnings quality at current margin structure. Working capital details are not disclosed (inventories, receivables, payables decomposition unavailable), but the large current asset balance vs. OCF shortfall may reflect slow collections or project advances not converting to cash. Financing inflow of ¥517 million covered the FCF deficit, implying reliance on debt or equity funding; the absence of cash balance disclosure prevents us from estimating year-end liquidity headroom. Overall, cash flow quality is weak, driven by negative gross margin and operating losses, with heightened dependence on external financing to sustain operations.

Dividend Sustainability

The company paid no dividend (DPS ¥0) and recorded a 0% payout ratio, appropriate given the net loss of ¥559 million and negative free cash flow of ¥508 million. FCF coverage of dividends is effectively 0.00x, and any resumption would require a return to positive OCF and earnings. With equity still positive but profitability deeply negative, near-term policy is likely to prioritize liquidity preservation and balance sheet stability over distributions. Absent clear visibility on margin repair and cash generation, dividend capacity remains constrained.

Risk Assessment

Business Risks:

• Project execution and pricing risk evidenced by negative gross margin
• Revenue volatility from project timing and potential customer concentration
• Competitive pressure in medical/IT systems leading to discounting or cost overruns
• Dependence on external financing to bridge operating cash burn
• Supplier cost inflation and pass-through challenges
• Limited operating scale magnifying fixed-cost absorption issues

Financial Risks:

• Sustained negative OCF and FCF requiring continual financing inflows
• Potential liquidity shortfall given unreported cash balance and large current asset reliance
• Covenant/refinancing risk if interest-bearing debt is present (details undisclosed)
• Dilution risk if equity issuance is used to fund losses
• Working capital swings due to lumpy project billing and collections

Key Concerns:

• Negative gross profit (¥-115.9 million) indicating structural margin stress
• Large operating loss (¥-410 million) with EBITDA of ¥-401 million
• Revenue down 44.6% YoY to ¥866 million
• Free cash flow of ¥-508 million funded by ¥+517 million financing CF
• Limited disclosure on cash, inventories, and debt composition

Investment Implications

Key Takeaways:

• ROE of -77.96% driven by a -64.55% net margin; profitability is the primary issue
• Gross margin of -13.4% highlights immediate need for pricing/mix and cost remediation
• Current ratio of 156% offers some buffer, but liquidity quality is uncertain without cash disclosure
• OCF of ¥-447 million and FCF of ¥-508 million necessitated external funding (+¥517 million)
• Leverage is moderate (assets/equity 1.94x; liabilities/equity 1.16x), but cash burn pressures solvency over time

Metrics to Watch:

• Order backlog and new bookings to gauge revenue recovery
• Gross margin trajectory and project-level profitability
• SG&A run-rate and breakeven revenue threshold
• Operating cash flow and working capital conversion (DSO/DPO where available)
• Equity ratio and interest-bearing debt levels, including any covenant disclosures
• Cash and equivalents balance and financing runway

Relative Positioning: Within TSE small-cap healthcare/IT systems integrators, Image One appears under margin pressure with significantly negative gross and operating margins; balance sheet leverage is moderate, but cash generation lags peers that maintain positive gross margins and steadier backlog visibility.

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