J-Holdings Corp. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥115M
• Operating Income: ¥-257M
• Net Income: ¥-321M
• EPS: ¥-24.29

Income Statement

Balance Sheet

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

FY2025 Q3 was weak, with a steep operating loss and negative net income against a smaller revenue base. Revenue was 1.15 (100M JPY), down 16.0% YoY, indicating demand softness or project delays. Gross profit reported at 0.79 and gross margin at 68.9% appear high for the scale, though the gross profit figure exceeds reported revenue, suggesting either classification differences or inclusion of other operating income in gross profit. SG&A of 2.87 materially exceeded gross profit, driving operating income to -2.57 and ordinary income to -2.58. Net income was -2.05 (EPS -24.29 JPY), implying a net margin of -178.3%. Operating margin on reported figures was approximately -223% (calculated), underscoring severe operating deleverage. With only revenue YoY disclosed and no YoY margin disclosures, we cannot quantify margin expansion/compression; absolute margins deteriorated to deeply negative territory. Equity is thin at 0.33 (100M JPY), pushing leverage high (D/E 12.03x; financial leverage 13.03x). Liquidity appears adequate on headline (current ratio ~3.37x), supported by cash and deposits of 0.53, but short-term loans of 0.70 versus reported current liabilities of 0.65 present classification inconsistencies that warrant caution. ROE is a deeply negative -621.2%, driven primarily by losses magnified by the very small equity base. Cash flow data were not disclosed; hence, earnings quality cannot be validated via OCF, and the significant net loss raises concerns about cash burn. Retained earnings are negative (-9.16), and capital structure relies on paid-in capital, implying limited internal buffers for ongoing losses. Without capex, OCF, or financing cash flow detail, visibility on runway and refinancing needs is constrained. Forward-looking, the company must reduce SG&A, stabilize revenue, and possibly recapitalize; otherwise, continued losses could pressure covenants and liquidity despite the current ratio. Near-term priorities likely include resizing opex to the new revenue run-rate and securing funding flexibility.

Profitability Analysis

DuPont decomposition: ROE = Net Profit Margin × Asset Turnover × Financial Leverage = (-178.3%) × (0.267) × (13.03) ≈ -621.2%. The largest driver of the change is the net profit margin, which is deeply negative due to operating losses (SG&A 2.87 far exceeding gross profit). Asset turnover is low at 0.267, reflecting a small revenue base against total assets of 4.30. Financial leverage is very high (13.03x), which amplifies the negative margin into an extreme negative ROE. Business reason: revenue contraction (-16% YoY) combined with a fixed-cost heavy SG&A base produced severe operating deleverage; non-operating items were unreported and apparently not a cushion. Sustainability: the current loss level appears unsustainable; margin pressure is likely cyclical/management controllable if SG&A can be reset, but until revenue stabilizes or costs are cut, negative margins persist. Concerning trend: SG&A absolute level (2.87) is 3.6x revenue (1.15) this quarter, indicating cost discipline issues and lack of scale; with revenue down, this suggests SG&A growth outpacing revenue on a run-rate basis.

Growth Assessment

Top-line contracted 16.0% YoY to 1.15, implying weaker demand, project timing, or client churn. The high reported gross margin (68.9%) is not translating to operating profitability due to outsized SG&A, so growth alone may not fix earnings without cost action. With no segment or backlog data, sustainability of revenue is uncertain; current run-rate suggests subscale operations. Profit quality is low as net loss (-2.05) dominates; absence of non-operating income indicates limited buffers from investments or financial activities. Outlook depends on cost restructuring and revenue recovery; near-term, we expect management to prioritize SG&A reduction and working capital discipline. Any recovery in utilization or pricing could alleviate operating losses, but the magnitude of the SG&A gap requires structural measures.

Financial Health

Liquidity: Current ratio 3.37x and quick ratio 3.37x indicate near-term liquidity coverage on reported figures. Note a classification inconsistency: short-term loans (0.70) exceed reported current liabilities (0.65), so liability split may be incomplete; nonetheless, cash (0.53) plus other current assets (2.20 total) should cover short-term needs. Solvency: D/E is 12.03x (warning: >2.0), with total equity at only 0.33 versus liabilities of 3.97, implying high balance sheet risk. Financial leverage (A/E) is 13.03x; even small losses materially erode equity. Maturity profile: large noncurrent liabilities (3.31) suggest reliance on longer-term debt; refinancing risk exists if covenants tie to profitability or net assets. No off-balance sheet obligations were disclosed. There is no warning on current ratio (<1.0) as it is above threshold; however, leverage is a material concern.

Cash Flow Quality

Operating cash flow was not disclosed; OCF/Net income cannot be calculated, so earnings quality cannot be corroborated. Free cash flow unreported; dividend and capex coverage cannot be assessed. Given the magnitude of the operating loss, base-case assumption is negative OCF absent significant non-cash items or working capital release. Working capital: current assets exceed current liabilities, but with limited receivables (0.12) and unknown inventories, liquidity is concentrated in cash and other current assets; no signs of working capital manipulation can be assessed without OCF and balance details. Sustainability: Without positive OCF or external funding, sustaining operations and any dividend is unlikely; monitoring monthly cash burn and borrowing headroom is essential.

Dividend Sustainability

Dividend data were unreported. With net loss (-2.05) and negative retained earnings (-9.16), distributable capacity appears limited under JGAAP. Absent positive FCF (unreported) and given high leverage, any cash distributions would likely be unsustainable and imprudent. Policy outlook: priority should be debt service and liquidity preservation; reinstatement or initiation of dividends would require a return to profitability and positive OCF.

Risk Assessment

Business Risks:

• Revenue contraction (-16% YoY) and small scale expose the company to operating deleverage.
• High SG&A relative to revenue (2.87 vs 1.15) suggests structural cost overhang.
• Customer/project concentration risk likely for a micro-cap, though not disclosed.
• Execution risk in restructuring and cost reduction.

Financial Risks:

• High leverage: D/E 12.03x and financial leverage 13.03x with very thin equity (0.33).
• Refinancing/covenant risk given persistent losses and negative retained earnings.
• Liquidity classification inconsistencies (short-term loans vs current liabilities) increase uncertainty.
• Potential dilution risk if equity recapitalization is required.

Key Concerns:

• Extreme negative ROE (-621.2%) driven by deeply negative margins.
• Unknown cash flow profile; OCF not disclosed, limiting visibility on runway.
• Interest coverage metric reported is not reliable due to unreported interest expense; true debt service capacity is unclear.
• Valuation of assets supporting 4.30 total assets vs small revenue base (utilization risk).

Investment Implications

Key Takeaways:

• Loss-making quarter with net margin -178.3% and operating margin approximately -223%.
• Revenue decline (-16% YoY) combined with elevated SG&A is the core problem.
• Balance sheet is highly levered (D/E 12.03x) with very thin equity (0.33).
• Headline liquidity is adequate (current ratio ~3.37x), but liability classification inconsistencies warrant caution.
• Cash flow visibility is poor; OCF and capex unreported.
• Negative retained earnings constrain shareholder returns and flexibility.

Metrics to Watch:

• Quarterly SG&A run-rate and evidence of cost restructuring.
• Revenue trajectory and order intake/backlog (if disclosed).
• Operating cash flow and free cash flow once reported.
• Debt maturity schedule, covenants, and refinancing actions.
• Equity level and any capital raise/dilution signals.

Relative Positioning: Versus TSE small-cap peers, the company appears subscale, highly leveraged, and operating at a significant loss, leaving it weaker on profitability and solvency, with only near-term liquidity offering partial relief.

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